YB new stock pitches (Thu, Oct 17)

* I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

Enterprise Group (E.TO/ETOLF), a Canadian oilfield services company with a market cap of $140 million and an EV/EBITDA of 10, has signed an exclusive agreement with FlexEnergy to provide modular natural gas turbines. These turbines offer a cleaner alternative to diesel generators at well sites, with nearly zero emissions and a 16-month payback period. The company has already deployed about 30 turbines and has growth potential in mining and edge data centers. Within five years, Enterprise Group could potentially generate annual profits of around $50 million. The company is well-positioned to benefit from the expansion of Canadian natural gas exports, with new LNG facilities expected to be completed in 2025. Despite its commodity exposure, Enterprise Group presents a rare opportunity in this sector, trading at $2.41 per share.

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iCAD, a leader in AI mammography, is trading at multi-decade lows despite its transition to a cloud SAAS model with potential for $30M+ ARR from existing customers. The company's ProfoundAI suite detects 23% more cancers and reduces reading time by 50%, with partnerships including Google, NVIDIA, and GE Healthcare. Near breakeven with 85%+ margins and $20M net cash, iCAD is shifting from perpetual licenses to cloud-based subscriptions, targeting $12k/year/contract. The company aims to expand market share beyond its current 1/9th of U.S. mammography exams and enter new global markets. Legislative tailwinds include mandatory density assessments and potential CPT codes for AI-assisted 3D mammography. Risks include competition from Hologic's dominant installed base and management trust issues. Valued at 8x ARR with 30% YoY growth, the stock could be a 5-bagger in three years. Catalysts include the December radiology conference and potential insider buying, while the main bear case centers on Hologic's market dominance.

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More stock pitches from ClearBridge Small Cap’s fund letter in “The Rest of the Pitches” section

Meritage Homes Corporation (MTH), a homebuilder operating in the western and southeastern United States, has become our largest new position in the consumer discretionary sector. Despite current high mortgage rates affecting homebuilders and housing demand, we believe a persistent U.S. housing shortage exists. An anticipated decline in interest rates and subsequent mortgage rates is expected to benefit homebuilders significantly. We chose to shift our investment from Century Communities to Meritage Homes due to Meritage's higher historical returns at a comparable current valuation. This decision aligns with our view on the potential for the homebuilding sector and Meritage's specific strengths within it.

Read the full article here. Read time: 1 min