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Disinfect Your Portfolio with Massively Undervalued TOMI Environmental Solutions

Disinfect Your Portfolio with Massively Undervalued TOMI Environmental Solutions

Summary

TOMI Environmental Solutions, Inc. (TOMZ) specializes in disinfection and decontamination, owning patented technology invented under a grant from DARPA, a branch of the U.S. Department of Defense.

TOMZ’s Revenues have increased an astounding 512% in Q2 of 2020 over last year for all-time record company revenues of $10,028,000 in Q2 alone.

TOMZ is profitable, earning .24 per share in Q2. On an annualized basis, TOMZ would have a p/e of only 7.

With the Covid-19 pandemic showing no signs of slowing and in fact increasing, TOMZ’s superior disinfecting products and solutions, proven to kill SARS-CoV-2 on contact, are needed more than ever.

TOMZ just uplisted to the NASDAQ which will introduce TOMZ’s story to a much larger pool of investors at a time when their industry is in focus. I expect these investors to see the extraordinary value that TOMZ’s current share price presents and I am a buyer in advance of the discovery of TOMZ by other market participants.

Investment Thesis

With the SARS-CoV-2 pandemic showing no near term signs of abating, the “new normal” globally will mean a fundamental change to the way that people go about their daily lives. In addition to personal protection (masks, gloves, hand washing and disinfection of surfaces), all businesses, schools, hospitals, hotels, restaurants, supermarkets and practically every location will be using some form of disinfection/decontamination process if they plan to keep customers, workers and students healthy.

Not only that, but before backpedalling on the statement, the US Centers for Disease Control and Prevention temporarily acknowledged that SARS-CoV-2 is not solely transmitted through droplets by way of coughs or sneezes. The CDC updated its guidance on its web page on Friday, September 18 to state that people can get Covid-19 simply through the following types of transmission:

…through respiratory droplets or small particles, such as those in aerosols, produced when an infected person coughs, sneezes, sings, talks or breathes.”

Then, the language including “sings” or “breathes” as culprits responsible for spreading the virus was removed, and a note at the top of the webpage as of September 21 states: “A draft version of proposed changes to these recommendations was posted in error to the agency’s official website. CDC is currently updating its recommendations regarding airborne transmission of SARS-CoV-2 (the virus that causes COVID-19).”

Regardless how the CDC chooses to parse it, many scientists (239 scientists signed on to this linked article) have warned that Covid-19 infection is caused by airborne transmission not only from coughing or sneezing, but though micro droplets that can be transmitted via talking and breathing, and much farther than 6 feet in indoor environments.

For true disinfection, applications are needed that don’t just disinfect surfaces, but also the air. Not all disinfection processes are the same, and TOMZ’s process stands head-and-shoulders above the rest as I will explain shortly.

After TOMZ’s share consolidation, the earnings per share for Q2 ended June 30, 2020 was .24. With an astounding 512% growth in revenues from Q2 of the previous year and signs that demand for services are increasing, it is not unreasonable to extrapolate a forward looking net profit of .96 per share on an annual basis. This translates to a price to earnings ratio of only 7.

For comparison, the average p/e ratio of the S&P 500 index is currently 22.2, almost 4 times higher. TOMZ would be conservatively valued at $22 per share, just to come up with a value consistent with the S&P average. This doesn’t take into account any future earnings growth, while the S&P average earnings growth beyond the median S&P 500 earnings growth rate of 12.01% (from 2009 onward).

So why isn’t TOMZ currently priced at $22 per share?

I think there are a few reasons for this.

  1. They are a largely unknown and under-followed company;
  2. They were until October 1 trading on the Over-the-Counter exchange, typically limiting participation to a much smaller portion of the investing world;
  3. Investors have not yet contemplated the continuing impact that the SARS-CoV-2 pandemic will have on society going forward as it relates to disinfection/decontamination.

TOMZ did indeed have an extraordinary run-up, hitting a high of $17.04 per share on 8/11/2020 on a split adjusted basis but after Q2 earnings were released on 8/13/2020, the stock made an inexorable descent to where it is now. I am not sure why the stock fell after earnings, perhaps because of some unrealistic expectations for revenue growth coming off of a record Q1 into an all time record revenue Q2. Regardless, I believe that at the current price TOMZ is extremely undervalued. It represents the rarest of finds, both a growth stock and a value stock.

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Data by YCharts

TOMZ’s Superior Technology

TOMZ technology is a combination of its proprietary sprayer or “fogging” device and a specially formulated and EPA registered low-percentage hydrogen peroxide solution. At the tip of the sprayer a cold plasma arc is created between electrodes, and as the sprayed hydrogen peroxide solution passes through the cold plasma arc, the double bond of hydrogen peroxide is broken, converting to Hydroxyl Radicals, a type of Reactive Oxygen Species (ROS). These Hydroxyl Radicals kill even the most deadly pathogens: Ebola, SARS-COV-2, MRSA, you name it.

Delivered from the sprayer after the arc in an extremely fine mist that moves  like a gas, the microscopic Hydroxyl Radicals penetrate all areas easily, such as corners, crevices, seams, etc. The Hydroxyl Radicals attach to bacteria, viruses, and molds, destroying their proteins, carbohydrates and/or lipids immediately via oxidation. This renders them inert or harmless on contact.

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Source: TOMI Website

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