Small Cap Biodiesel Stock Methes Energies International Ltd (MEIL) Soars: Now What? REGI & FUE

On Tuesday, lightly traded small cap biodiesel stock Methes Energies International Ltd (NASDAQ: MEIL) soared 53.78% on record production figures, meaning its worth taking a closer look at whether that surge was actually warranted plus look at the performance of potential peers like biodiesel stock Renewable Energy Group Inc (NASDAQ: REGI) and biofuel ETF the ELEMENTS MLCX Biofuels Index TR ETN (NYSEArca: FUE).

What is Methes Energies International?

Small cap Methes Energies International is a renewable energy company offering products and services to biodiesel fuel producers both in Canada and the US that is produced at its production facility in Mississauga, Ontario, and at its 13 MGY facility in Sombra, Ontario. Among Methes Energies International's services are selling commodities to its network of biodiesel producers, selling their biodiesel production and providing clients with proprietary software to operate and control their processors. In addition, the company remotely monitors the quality and characteristics of its clients' production, upgrades and repairs their processors and advises clients on adjusting their processes to use varying feedstock to improve the quality of their biodiesel.

As for potential biodiesel peers or bio fuel benchmarks, the Renewable Energy Group is a leading North American biodiesel producer with a nationwide distribution and logistics system while the ELEMENTS MLCX Biofuels Index TR ETN tracks the performance of the MLCX Biofuels Index which comprises of futures contracts on physical commodities that are either biofuels themselves or feedstock commonly used in the production of biofuels.  

What You Need to Know or Be Warned About Methes Energies International

Yesterday, Methes Energies International announced that its October and November production targets for the current calendar year were achieved with November production being the highest in gallons in the company's history, surpassing September and October by more than 60,000 gallons for each month. Methes Energies International now anticipates that it will record higher fourth-quarter revenues than any previous quarter in the company's history.

However, investors need to keep in mind that so far this fiscal year, Methes Energies International has reported revenues of $1.747M (Aug 31, 2013), $2.328M (May 31, 2013) and $210k (Feb 28, 2013) plus net losses of $1,320M (Aug 31, 2013), $1,492M (May 31, 2013) and $1,391M (Feb 28, 2013). For the past two fiscal years, Methes Energies International has reported revenues of $6.550M (fiscal 2012) and $11.786M (fiscal 2011) plus net losses of $3,967M (fiscal 2012) and $811k (fiscal 2012). At the end of last August, Methes Energies International had $505k in cash and $213k in receivables to cover $7.229k in current liabilities (Note: MEIL's wholly-owned subsidiary, Methes Energies Canada Inc., closed on a total of $1,500,000 Working Capital Facility for its Sombra, Ontario biodiesel manufacturing plant back in August). With that in mind, yesterday's announcement looks a little less exciting. 

Otherwise, it should also be mentioned that Methes Energies International's announced a Letter of Intent on Monday to acquire the assets of OTC Energy Technologies Inc. This includes all of OTC's technologies and knowhow relating to the conversion of several types of biomass into a chemical quality syngas which can be converted into renewable alcohols such as ethanol and methanol, renewable hydrocarbons such as jet fuel and gasoline. The press release though gave no financials details regarding the deal as a definitive agreement has yet to be signed.       

Share Performance: Methes Energies International vs. REGI & FUE

On Tuesday, small cap Methes Energies International surged 53.78% to $3.86 (MEIL has a 52 week trading range of $1.50 to $8.19 a share) for a market cap of $17.59 million plus the stock is up 10.3% since the start of the year and down 10.2% since December 2012. It should be mentioned that the stock has a daily average trading volume of 16,430, but some 1,259,614 shares were traded yesterday - a big reason for the surge.

Here is a look at the performance of Methes Energies International verses that of the Renewable Energy Group and the ELEMENTS MLCX Biofuels Index TR ETN:

As you can see from the above chart, the performance of small caps Methes Energies International and Renewable Energy Group have been all over the place while the ELEMENTS MLCX Biofuels Index TR ETN has been relatively flat for the past few years.

Finally, here is a look at the latest technical charts for all three investments:

The Bottom Line. Small cap biodiesel stock Methes Energies International's 53.78% surge yesterday seems rather unjustified and largely due to the stock's low trading volume – meaning there could be some pull back this week. Nevertheless and when the dust settles, the stock could still be worth watching.