About a year and a half ago, I decided that simply choosing annual picks for the following year sometime in mid December was leaving potential opportunities on the table the rest of the year. That’s when I decided to launch mid year #SealOfApproval picks for those special opportunities that arise.
D-Box Technologies ($DBO.TO) was my first in February of last year and as of today that has delivered a return of 762%. Fast forward to February of this year and Biorem became my first mid year pick of 2026 at $2.42. It is currently up 25% from that selection, peaking at 48% or $3.57 in May after their first quarter was released which became a “sell the news” event. A move which I was puzzled by particularly since those financials received an upgrade to four stars and their second consecutive upgrade as well.
Prior to their financials coming out this morning, they traded at an 11.3 P/E with an EV/EBITDA ratio of just 5.9.
The headlines appear very impressive with a 66% revenue increase and increasing their profitability by over 260%. So, could we be looking at a company about to set new all time highs ($3.80), or are there some fly’s in the ointment we must consider?
Let’s find out.
(Free release scheduled for Aug 4)
Balance Sheet:
Biorem has a current ratio of 3.5 (up from 3.3 last quarter) consisting of $7.2M in cash, $16.5M of accounts receivable, $2.1M worth of inventory and $7.25M in other short term assets against just $9.3M in liabilities due over their next twelve months.
Cash is down, receivables up, payables down, prepaids and inventory up suggest the next section (Cash Flow) may not look so great. If I have criticism regarding Biorem, it’s that their disclosures within their financials are on the soft side.
When revenues are up nearly 60%, it’s perfectly reasonable to expect that A/R would move in a similar direction. It is, up 39% from their year end six months ago.
The only time BRM discloses an A/R aging report is at year end. The one above is not without some problems, therefore I would be much more comfortable seeing this on a more regular basis.
Biorem has $1.56M remaining on a $4M term loan ending in December of 2028 and an untapped $3M line of credit.
Cash Flow:
As mentioned, their cash flow doesn’t look great with $3.95M of operational burn YTD compared to generating $3.35M at this time last year, a negative $7.3M turnaround.
You will notice however that prior to working capital adjustments, their OCF is up by 71% to $2.43M. Due to paying down their payables and increases in prepaids and the growth in A/R, all contributed to the poorer than ideal result. This should, assuming their A/R is low risk, will turnaround in upcoming quarters. Their burn rate so far this year is $1.13M in Q1 and $2.82M in Q2.
Share Capital:
A bit of a misstep here within their MD&A. The period end is actually June 30th, so it looks like a cut and paste error from their last quarter. The number of outstanding shares is approx 16.2M shares as of the actual date with some options being exercised just prior to quarter end.
3.1M options outstanding, all ITM
Announced an NCIB in June. Bought back a limited number of shares over a few week period in September. Not much of a commitment here - more like a game of just the tip to see how it feels.
Just 2.5% insider ownership, all from the CEO.
Income Statement:
As you already know, another banger of a quarter coming off Q1 when they had a 44% increase. They bested that with 66% going from $9.4M last year to $15.7M this year. In addition, gross margins were up by 430 basis points to 31.3%, therefore generating 93% more gross profit dollars on 66% more business. That’s a sexy combo.
Operating expenses were up by 46% which I’ll call good conversion. G&A costs were extremely well controlled , down 17% compared to last year but sales and marketing costs rose by 159%, highly influenced by sales commissions in the period. That still awards them the Wolf Trifecta for Q2.
Even with income taxes increasing by 2.7x in the quarter, net earnings came in at $1.98M, 12.6% of revenue and 166% better than the $745k they delivered in the comparable quarter.
On a YTD basis:
Revenue of $22.5M, up 59%
Gross margin of 28%, up 220 basis points with gross profit dollars up by 72%
Operating expenses grew at half the rate of revenue - 30%
Net income of $2.18M, an increase of 180%
A double Wolf Trifecta for their quarter and YTD results.
Summary:
Outside of some cash flow concerns which will likely turn out to be temporary, Biorem has knocked it out of the park on almost every other metric through their first six months of 2026.
In my February article calling out Biorem as a mid year pick, I had this to say.
The Q1 financials did indeed become a sell the news event with the price getting awfully close to my $3.73 target when it topped out at $3.57, and investors received a 48% upside compared to my estimate of 54%. Not bad I’d say.
The unknown for me then was would their order intake match their revenue and maintain that record backlog? That was going to be the determining factor for me on how long to hold Biorem.
So far they have been able to achieve that with $14.8M of order intake, leaving their backlog at $75.5M, just shy of their record $77M. They are also gaining traction across all geographies that they operate in and have been successful in both their construction and service segments.
My $3.73 price target back in February was based on $50M of TTM revenue and $5M in net income. Today they sit at $50.7M in revenue and $6.2M net income on a TTM basis. At 12x earnings that would put them at $4.60/share. I’ll discount that by 10% due to their cash flow situation which brings a new price target of $4.15/share.
That’s a 37% upside from this mornings open and 71% from the original pick.
Maintaining the four star review as well.
Disclaimer:
My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.
Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.