Thermal Energy International Inc. (TMGEF)

February 7, 2021

We continue with examples of Boole’s quantitative investment process in action.

Recently, we looked at the following companies:

Helix Energy Solutions Group, Inc. (HLX):

Five Star Senior Living Inc. (FVE):

North American Construction Group Ltd. (NOA):

Vera Bradley, Inc. (VRA):

Lazydays Holdings, Inc. (LAZY):

Karora Resources Inc. (KRRGF):

Diamond S Shipping Inc. (DSSI):

DHI Group, Inc. (DHX):

Saga Communications Inc. (SGA):

Northwest Pipe Co. (NWPX):

Smart Sand Inc. (SND):

Terravest Industries Inc. (TVK.TO):

LGL Group, Inc. (LGL):

G-III Apparel Group, Ltd. (GIII):

Hummingbird Resources Plc. (HUMRF):

Micropac Industries, Inc. (MPAD):

Barrett Business Services, Inc. (BBSI):

Delta Apparel, Inc. (DLA):

AdvanSix, Inc. (ASIX):

Universal Technical Institute (UTI):

Burnham Holdings Inc (BURCA):

Select Interior Concepts (SIC):

Manitowoc (MTW):

Ciner Resources LP (CINR):

Global Ship Lease (GSL):

Alico, Inc. (ALCO):

Genco Shipping (GNK):


Tidewater (TDW):

TravelCenters of America (TA):

Teekay Tankers (TNK):

Ranger Energy Services (RNGR):

Macro Enterprises (Canada: MCR.V):

This week, we are going to look at Thermal Energy International Inc. (TMGEF).  Thermal Energy International creates products that improve the efficiency of industrial thermal energy.

TMGEF is not a typical deep value stock.  It has a high P/B that reflects its fast growth.  The global market for industrial thermal energy efficiency is $250 billion.  This means TMGEF has a huge amount of room to grow.

However, the Boole Microcap Fund does not own shares in Thermal Energy International.  TMGEF would be a good candidate for purchase if the stock price were lower relative to current earnings and cash flow.  So TMGEF is on our watch list.  The stock may get cheaper in the future.

TMGEF has a market cap of $25.3 million.  The stock price is $0.16.  (Although TMGEF is a Canadian company, this writeup is in terms of U.S. dollars.)

Step One

First we screen for cheapness based on five metrics.  Here are the numbers for Thermal Energy International:

    • EV/EBITDA = 4.96
    • P/E = 9.01
    • P/B = 12.14
    • P/CF = 5.17
    • P/S = 0.62

(The company has been growing strongly for most of the past five years.  The ratio’s assume that Thermal Energy International continues to grow.)

Step Two

Next we calculate the Piotroski F-Score, which is a measure of the fundamental strength of the company.  For more on the Piostroski F-Score, see my blog post here:

TMGEF has a Piotroski F-Score of 6.  (The best score possible is 9, while the worst score is 0.)  This is decent.

Step Three

Then we rank the company based on low debt, high insider ownership, and shareholder yield.

We measure debt levels by looking at total liabilities (TL) to total assets (TA).  Thermal Energy International has TL/TA of 76.1%, which is decent.

Insider ownership is important because that means that the people running the company have interests that are aligned with the interests of other shareholders.  At TMGEF, insiders own 8% of the shares, which is solid.

Shareholder yield is the dividend yield plus the buyback yield.  At TMGEF, the dividend yield is zero.  But the company, rather than buying back shares, has issued some shares via stock options. So shareholder yield is negative.

Step Four

The final step is to study the company’s financial statements, presentations, and quarterly conference calls to (i) check for non-recurring items, hidden liabilities, and bad accounting; (ii) estimate intrinsic value—how much the business is worth—using scenarios for low, mid, and high cases.

See  TMGEF’s most recent investor presentation (January, 2021):

Intrinsic value scenarios:

    • Low case: The business may shrink 50 percent.  In that case, it would be worth $0.08, which is 50 percent lower than today’s $0.16.
    • Mid case: If the business continues to grow, then EBITDA may approach $4.89 million.  With an EV/EBITDA of 10, the stock would be worth $0.32, which is 100% higher than today’s $0.16.
    • High case: EBITDA may reach $6.11 million.  With an EV/EBITDA of 10, the stock would be worth $0.40, which is 150% higher than today’s $0.16.



An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.  See the historical chart here:

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.


If you are interested in finding out more, please e-mail me or leave a comment.

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Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.