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Monday, November 18, 2013 - 07:00

This Stock Could Make You 28% While It Saves The Planet

Monday, November 18, 2013 7:00 AM

Having been born and raised outside of Pittsburgh, I know firsthand of the ravages of factory pollution.

My grandfather told me stories about the streetlights coming on midday because of the amount of smog in the downtown area. Many of the region's streams and rivers were void of life back in the 1960s due to industrial waste deliberately and inadvertently seeping into the waterways.

Things have improved greatly since those dark days. I have fond memories of fishing local streams for pollution-resistant fish like carp and catfish. Those same streams had been void of life just a decade or so prior.

Today, many of these Pittsburgh streams hold healthy populations of clean water fish like smallmouth bass and trout. This is a great testament to the success of the U.S. environmental movement, as well as commercial firms dedicated to pollution reduction.

Personally, I like it when the free market helps improve the environment. It's a great feeling to be able to earn a profit by doing a good thing for the environment.

The free market has spawned firms like Illinois-based Fuel-Tech (NASDAQ: FTEK), which specializes in pollution reduction technology. Not only do the company's products help mitigate the negative effects of industrial pollution, its shares are setting up to be a great buy. Let's take a closer look.

Founded in 1987, FTEK provides boiler optimization and air pollution reduction technologies to global industry and utilities. In addition, the firm's FUEL CHEM products improve the efficiency, reliability and environmental status of combustion units. It has a market cap of just under $132 million.

The company posted strong third-quarter results Monday after the close, with revenue climbing 35% year over year to $33.6 million. Operating income shot from $1.6 million in the year-ago quarter to $5.3 million this quarter, and net income advanced to $3.5 million from $1.2 million. More domestic projects and a large contract in Chile pushed revenue from the air pollution control (APC) segment higher by over 50%.

President and CEO Douglas G. Bailey stated, "Higher revenues, improved consolidated gross margins, and increased profits for the 2013 third quarter were driven by a favorable mix of domestic and international APC projects, as well as steady contributions from FUEL CHEM. We also ended the quarter in a strong financial position that included $1.05 per share in cash, and a very modest debt profile."

He continued saying, "Our business development efforts continue in earnest, and we are currently pursuing a number of large project awards in the U.S. and overseas. We continue to focus on broadening our international presence, especially in China, and addressing domestic opportunities driven largely by state consent decrees and other mandates. We also remain committed to investing in R&D and pursuing licensing opportunities as a means to enter new markets and build upon our existing competencies."

In addition to the CEO's enthusiasm for growth, the company has a backlog of $33.4 million and working capital of $46.4 million. I think this all equates to a powerful investing opportunity.

As you might imagine, the great Q3 results created a gap up on the price chart. Shares jumped from $4.60 to around $5.60 on the news. FTEK is a very low volume stock, and the gap up has my technical analyst side a little concerned. Although everything appears fundamentally solid, waiting for shares to break out above $5.81 is warranted.

Action to Take -->

-- Buy FTEK above $5.81
-- Set stop-loss at $4.97
-- Set initial price target at $7.43 for a potential 28% gain in three months

This article originally appeared on ProfitableTrading.com:
Low-Priced Stock Could Make You Double-Digit Profits As It Saves The Planet

P.S. I just finished reading a special report by my colleague, Amber Hestla-Barnhart, about how investors can consistently and reliably pull income from the options market. And you don't have to be a sophisticated trader to do it. Go here to learn more.

David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.