The Eqtec (LSE:ETQ) share price has had a difficult year. Despite achieving some explosive growth in 2020, this green energy penny stock has been on a downward trajectory throughout 2021. Since the start of the year, it has fallen by just over 40%. However, over the 12 months, the Eqtec share price is still up by nearly 115%.
Last week, the firm released its interim earnings report, which showed some promising signs of progress. So, is the stock about to make a comeback? And should I consider adding it to my portfolio? Let’s take a look.
The fall of the Eqtec share price
I’ve explored this company before. But as a quick reminder, Eqtec is a waste-to-energy business that has developed a proprietary gasification technology. This system takes in waste plastic as well as biomass and converts it into a clean synthetic gas that can be used as an alternative fuel for gas turbine power plants.
Given that the UK government recently unveiled its plan to eliminate carbon emissions by 2050, it’s easy to see the allure of this business to investors. Even more so when considering that the waste-to-energy market is expected to grow by 80% over the next six years.
But this excitement from investors ultimately translated into a runaway valuation, with the Eqtec share price pushing the business’s market capitalisation to as high as around £270m. By comparison, revenue generated in 2020 came in at a mere €2.23m (£1.91m). With that in mind, it’s pretty clear that the stock was being heavily inflated by unrealistic expectations. So, seeing the Eqtec share price fall throughout 2021 is hardly surprising.
Growth on the horizon
Regardless of how Eqtec’s stock has been performing, the underlying business is making good progress. In its latest interim results, it said the construction of its power plants in California and Greece continued to stay on schedule. Meanwhile, planning permission has been granted for its flagship Billingham project. Once constructed, this facility is estimated to generate enough electricity to power 50,000 homes in the UK. And more recently, the business has signed a new three-year collaboration agreement with Toyota Motors to explore a waste-to-energy solution for its car manufacturing plant in Deeside.
Assuming ongoing contracts are completed on time this year, the firm is set to generate total revenue of €15m (£12.84m) by the end of 2021. That’s about a 580% increase compared to a year ago. Needless to say, if the firm can continue delivering triple-digit growth moving forward, the Eqtec share price could quickly start rising again.
The bottom line
Overall, my views on this business have improved since the last time I looked at it back in April. The progress made during the previous six months is quite encouraging. However, there remains a long road ahead. And even after this year’s decline, the Eqtec share price continues to look too expensive for me. Therefore, I’m still keeping this penny stock on my watchlist.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.