I like this water stock! Is now a good time to invest?

Is now a good time to invest in AIM-listed water stock Amiad Water Solutions? I think it could be an opportunity for confident investors.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Amiad Water Systems (LSE:AFS) released its interim results for the first half of 2020 a couple of weeks ago. It’s the leading global producer of water treatment and filtration solutions. And it reported a fairly positive outcome considering the impact of Covid-19 on its operations. Is now a good time to invest?

Revenue fell by nearly 12% to $51.5m (it reports in USD) but margins, profitability and cash improved. I think water stocks make an appealing investment and Amiad’s water filtration business has me interested. 

Masters of filtration

A growing population and the extreme effects of climate change are driving the likelihood of increased water shortages globally. We need solutions and 57-year-old Israeli firm Amiad is playing its part.

Amiad’s product offerings are used in water filtration systems all around the world. We can find them in micro-irrigation, membrane protection, wastewater treatment, hydroponics, cooling systems and seawater filtration. I expect many of these areas are going to be in higher demand as the world moves to solve water shortages, improve global food distribution and prevent climate change.

A prominent shareholder

Late last year FIMI Opportunity Funds, Israel’s largest group of private equity funds, moved to become the controlling shareholder in Amiad Water Systems. It did this by increasing its stake to nearly 40% after building a strong position over the prior 18 months and completing via a share subscription early this year. This brought net cash at 30 June of $12.2m to Amiad, allowing it to get rid of debt.

I think FIMI’s involvement is a positive sign the company will strengthen. FIMI’s founder and CEO Ishay Davidi now sits on Amiad’s board. He’s a prominent business figure in Israel and was in Dubai last week as part of a banking delegation to encourage commercial cooperation between the countries.

Amiad intends to use the capital raised towards implementing its five-year plan to drive growth, scale up production and access new products and markets. It’s already begun investing in future growth by introducing manufacturing automation to its metal departments and upping its research and development efforts. Earlier in the year, it signed a five-year agreement with Netafim. This is a precision irrigation company with a far-reaching global distribution network.

Is now a good time to invest?

I think Amiad looks an exciting company, but is now a good time to invest? The pandemic is having a global effect on business. It’s slowing farming, manufacturing and oil production, all of which are sectors Amiad sells to.

There’s the argument that economic uncertainty is suppressing share prices, and when the oil price recovers, opportunities for orders will increase. But being listed on AIM means it comes with risks. Its shares have seen extreme volatility over the past 10 years and don’t appear to have a lot of liquidity. The Amiad share price is down 14% year-to-date. 

The board believes current market conditions could present acquisition opportunities and are looking to accelerate growth. Although uncertainty remains and full-year revenue is likely to be lower than 2019, water scarcity is real.

I believe Amiad could play a part in solving this problem, providing it makes the right deals and doesn’t get too heavily laden in debt. Whether this is now a good time to invest depends on your appetite for risk and your investment time horizon.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »