We came across a bullish thesis on Perimeter Solutions, SA (PRM) on Mindset Value’s Substack by Aaron Edelheit. In this article, we will summarize the bulls’ thesis on PRM. PRM Technologies, Inc.’s share was trading at $13.05 as of Sept 24th. PRM’s trailing and forward P/E were 14.15 and 25.71 respectively according to Yahoo Finance.
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Perimeter Solutions (NYSE: PRM) is a company that makes fire retardants used to fight wildfires. For the past couple of years, the company struggled as there weren’t many wildfires due to plenty of rain and very little fire activity thanks to lots of storms and an El Nino weather pattern which hurt their topline. But now, fires are becoming more frequent and severe in California and Canada. This means demand for Perimeter’s products is expected to rise again. The company doesn’t face much competition because a rival’s fire-retardant product failed making Perimeter the main supplier.
Perimeter has the ability to raise prices on its fire safety products every year because the cost of these products is a small but important part of firefighting. They’ve used this pricing power to maintain high profit margins. With heightened fire activity increasing insurance costs in high-risk areas are driving demand for fire prevention products, as insurers either raise premiums or withdraw coverage altogether. This trend forces states and companies to invest more heavily in fire suppression solutions.
We can expect that the acquisition of LaderaTech, a company that makes Fortify, a gel that can be applied to areas at high risk of fires, will help Perimeter generate more consistent revenue since it’s used for prevention and not just during fire seasons. The company also expanded its airbase’s capacity in Albuquerque, New Mexico to produce 145k gallons of fire retardants to prepare for higher demand. The potential market for fire prevention could be worth over $2 billion a year, giving Perimeter a solid growth opportunity. In conclusion, Perimeter has good potential which can be seen due to the shares it has been buying back instilling confidence in its future performance thus making it a good buy.
Perimeter Solutions, SA is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held PRM at the end of the second quarter which was 21 in the previous quarter. While we acknowledge the risk and potential of PRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.