SEYCHELLE ENVIRONMENTAL TECHNOL (OTC:SYEV)

Taking a small speculative position in SYEV

SYEV is breaking out of a flat line chart pattern and nearing its 52 week high of $0.45.  With its recent strong financial results, a strong chart and positive commentary from management, we will  once again look to take a small speculative position.

We have tracked the SYEV story on and off for the past 3 years.  The company has a history of over promising and under delivering, however, we are once again interested as the company just reported what on the surface looks to be a breakout quarter.  On Friday, via a 10-Q only, the company reported strong Q1 2016 results:

• Q1 2016 sales of $2.3 million vs $1.1 million in the prior year period

• Q1 2016 EPS of $0.02 vs $0.00 in the prior year period

They followed their 10-Q up with a press release issued this morning.  Commentary from the 10-Q suggests this strong sales momentum may continue:

“As we expand our distribution of the pH2O product line, and continue to strengthen relationships with existing customers, we anticipate improvement in sales volume to continue into subsequent quarters.”

The following commentary from press release has us mildly concerned that the quarter may not be the new norm due to its emergency & disaster product line:

“The increase in sales to $2.3 million is primarily due to significant increases in demand for private label products; targeted sales toward the emergency & disaster preparedness market, the success of which we attribute to increased worldwide awareness of the importance of preparedness due to highly-publicized natural disasters during the year”

The stock is nearing its 52 week high of $0.45.  Our new position is based on the company’s recent strong financial results, a bullish chart and positive commentary from management. We will update our members as we continue our due diligence process.

The company would earn $0.08 for its current fiscal year ending February 28, 2016 if it can at least hold its Q1 performance.  In this scenario we could see the stock trading between $0.80 (short-term) and $2.00 (by end of fiscal year). This represents P/E multiples of 10 and 25 times $0.08.

Please note that the company has reported a few one quarter wonders in the past.