Taking Stock of Ecoark’s Risk Factors Post FY2021 Results

Last week, Ecoark (ZEST) declared results for Fiscal 2021. Let us take a look at the company’s performance, Fiscal 2022 guidance, and what’s changed in its key risk factors that investors should be aware of.

Operating as a diversified holding company through three subsidiaries, Ecoark provides quality management of fresh food, engages in oil and gas exploration, and provides transportation and logistics services and equipment financing to oilfield transportation services contractors.

Boosted by the acquisition of Banner Midstream in March 2020, Ecoark’s revenue jumped to $15.6 million from $0.6 million a year ago. Its net loss widened to $20.9 million from $12.1 million during the same period. Banner Midstream is expected to achieve positive operating cash flow in the first quarter of Fiscal 2022.

CEO of Ecoark Randy May said, “We made opportunistic purchases of oil and gas mineral leases during the height of the COVID-19 pandemic in 2020. These actions have positioned us well to aggressively produce these properties in conjunction with the rebound in economic activity and crude oil prices.” (See Ecoark stock chart on TipRanks)

For Fiscal 2022, based on the present $70 crude price level, Ecoark estimates Banner Midstream to garner revenue of $26.3 million and cash flow of $6.3 million. Further, assuming crude price at $80, Ecoark sees total revenue of $30.13 million and cash flow from operations of $5.39 million.

Additionally, in April, Ecoark was awarded $115 million in damages against Walmart (WMT) by an Arkansas jury. Ecoark expects Walmart to file an appeal related to the verdict.

Ecoark Risk Factors

According to the new Tipranks Risk Factors tool, Ecoark’s main risk category is Finance and Corporate, which accounts for 35% of the total 51 risks identified for the stock. The next two major risk factor contributors are Production, and Tech & Innovation at 27% and 16%, respectively. Since March, the company has added 22 new risk factors and removed 30 risk factors.

Ecoark trades on the OTCQB and its shares are subject to the unwillingness of institutional investors to build positions. Additionally, the liquidity on OTCQB is also lower. Ecoark believes the price and liquidity of its shares may be affected if they again fall under the ‘penny stock’ rules.

In light of the recent spate of cyber attacks, the company has also highlighted the failure of information technology systems and data security breaches as one of the risks to its future performance.

Compared to a sector average Finance & Corporate risk factor of 41.5%, Ecoark’s stands at 35.3%. Shares have dropped 51.8% so far this year.