Zefiro Methane: Turning Losses into Profits
A massive environmental problem lies dormant underground in the US. Millions of decommissioned, abandoned, orphaned, and improperly plugged oil and gas wells continue to release methane and other pollutants. Zefiro Methane specializes in locating, surveying, and properly plugging these contaminated sites. Through its subsidiaries Plants & Goodwin and Appalachian Well Surveys, the company now covers large parts of the value chain itself.
For a long time, however, Zefiro was unable to translate this market potential into profits. In fiscal years 2023/24 and 2024/25, revenue remained virtually unchanged at just over USD 32 million each year, while the company incurred significant losses. Since the management change in June 2025, however, the situation has changed fundamentally. Non-strategic costs were cut, the organization was streamlined, and the business was refocused on cash-flow-generating services.
The first signs of success are visible. In the first nine months of fiscal year 2025/26, revenue increased by 35.8% to USD 33.19 million. Earnings showed even more impressive growth. EBITDA improved from a loss of USD 5.5 million to a profit of USD 3.10 million. On an adjusted basis, earnings even reached USD 4.25 million. At the same time, Zefiro generated positive operating cash flow of USD 4.12 million and reduced its financial debt.
A three-year contract with the Ohio Department of Natural Resources provides additional planning certainty. The contract is valued at approximately USD 19.6 million and covers the decommissioning of about 200 wells. Work began in June and is scheduled to run through May 2029. This project alone could contribute approximately USD 6.5 million to revenue each year over the next three years.
A video presentation featuring Zefiro Methane CEO Catherine Flax can be found here:
In addition, there are several smaller but equally interesting contracts. For the Wood 12F project in Ohio, Zefiro is plugging 37 wells. The total contract value is USD 4.5 million. Three additional government-funded projects totaling USD 2.4 million began in July. In addition, Zefiro is working on at least 26 wells in Pennsylvania, New York, West Virginia, and Kentucky for a major private natural gas producer.
To meet growing demand, the company has acquired five rigs and additional equipment from Viking Well Service. According to management, this increases annual revenue capacity by approximately USD 10 million. Several of the additional units are already being used by a major customer. This demonstrates that the expansion was not undertaken on a speculative basis but is driven by concrete demand.
The Augsburg-based financial services provider GBC Research therefore expects strong growth. For the 2025/26 fiscal year just ended, analysts project revenue of USD 45.18 million and EBITDA of USD 3.73 million. In the current fiscal year, revenue is expected to rise to USD 57.92 million. EBITDA is projected to jump to USD 10.02 million. By 2027/28, revenue could reach USD 66.85 million and EBITDA USD 12.22 million.**
According to GBC, the CO₂ credit business has not yet been fully factored into these figures. By plugging leaking wells, Zefiro prevents future methane emissions. Once verified, these savings can be converted into emission credits and sold. This business is currently largely on hold but could resume in the second half of fiscal year 2026/27 following the introduction of a revised calculation method. Since this involves virtually no additional operating costs, above-average margins are expected.
GBC has initiated coverage of the stock with a “Buy” rating and a price target of USD 1.50 (CAD 2.12). Based on the current share price of around USD 0.44 (CAD 0.62), this translates to a potential upside of approximately 242%. If the company succeeds in translating its recent momentum into sustainable growth and stable profits, the market could completely reevaluate the stock. Even though the share has already gained more than 100% over the past year, it could very well double in value again in the coming months. However, the stock remains highly speculative.
Evonik: Strong Results Prompt Upgrade
Evonik shares are not quite as speculative. Analysts have also recently expressed very positive views on the company. DZ Bank upgraded the stock from “Hold” to “Buy” and raised its fair value from EUR 19 to 21. Compared to the current price of around EUR 17, the stock could therefore still gain a good quarter.
The trigger for the new rating was surprisingly strong preliminary figures for the second quarter. According to the company’s own statements, adjusted EBITDA is expected to be between EUR 600 million and EUR 650 million. With this result, Evonik significantly exceeded both market expectations and its own target of at least EUR 550 million. Higher sales volumes and prices were accompanied by ongoing cost reductions. In addition, the specialty chemicals group benefited from supply bottlenecks among Asian competitors.
Following the strong first half of the year, management raised its EBITDA forecast for 2026 from the previous range of EUR 1.7 to 2.0 billion to EUR 2.0 to 2.2 billion. This clearly exceeded the previous market consensus of around EUR 1.85 billion. DZ Bank now expects EUR 2.12 billion. With expected revenue of EUR 14.16 billion, the adjusted EBITDA margin would improve to around 15%.
At the same time, management is continuing to tighten the reins on costs. The “Evonik Tailor Made” program will be extended and expanded. In addition to the 2,800 job cuts already announced through the end of 2026, another approximately 3,200 jobs are to be cut from 2027 to 2029. Major acquisitions are ruled out through 2027. Priority is being given to organic investments and debt reduction.
However, the story is not entirely without its flaws. Part of the strong second-quarter performance resulted from temporary supply issues among competitors. If supply chains normalize, this tailwind could subside in the second half of the year. Price pressure on methionine also remains an issue. With an expected P/E ratio of around 11 and an enterprise value of just over five times EBITDA, the stock is nevertheless undervalued compared to the rest of the industry. The raised forecast and the stricter cost-cutting measures could now trigger a sustained revaluation.
Fuchs: The Silent Winner Amid Supply Chain Issues
Things are going just as well for lubricant specialist Fuchs. In the second quarter, revenue surged by 21% to around EUR 1.07 billion, according to preliminary figures. EBIT improved by 34% to EUR 135 million, exceeding the consensus estimate of EUR 108 million by a whopping 25%. Despite rising raw material costs, the EBIT margin increased by 1.1 percentage points to 12.6%. For the first half of the year, revenue rose by 11% to approximately EUR 2.0 billion. EBIT even increased by 24% to EUR 260 million. In addition to organic growth, Fuchs benefited from orders brought forward in the wake of the Middle East conflict as well as from delivery problems experienced by some competitors. Because the Group was able to reliably serve its customers, it secured additional volume.
Management subsequently raised its EBIT forecast for 2026 from approximately EUR 450 million to between EUR 460 million and EUR 480 million. Analysts at mwb research estimate EUR 474 million. That would represent a 9% increase over the previous year. EBIT is expected to rise further to EUR 528 million by 2028. At the same time, net cash is likely to increase from EUR 151 million in 2025 to more than EUR 500 million.
Of course, some of the orders brought forward are likely to reverse in the second half of the year. Higher raw material costs could also temporarily weigh on margins and cash flow. What matters most, however, is that a portion of the newly won orders could remain with Fuchs permanently. Many customers want to diversify their supply chains and reduce their dependence on individual suppliers.
The experts at mwb therefore recently reaffirmed their “Buy” recommendation and raised the price target for the preferred stock from EUR 46.50 to EUR 49. Compared to the current share price of just over EUR 40, this represents a potential gain of around 23%. Earnings of EUR 2.55 per share are expected for 2026, resulting in a P/E ratio of just over 15. Given the strong balance sheet, robust business model, and high returns on capital, the stock thus appears attractively valued.
Fuchs is the quality stock among the three presented here; Evonik is the attractively valued turnaround play; and Zefiro Methane is the speculative stock with the highest potential and the most upside. For all three companies, recent financial results now provide strong support for the analysts’ optimistic assessments.
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