Pure Cycle Corporation (PCYO) | Investment Case

1. Company Snapshot

1.a. Company Description

Pure Cycle Corporation designs, constructs, operates, and maintains water and wastewater systems in the Denver metropolitan area and Colorado Front Range in the United States.It operates in two segments, Wholesale Water and Wastewater Services, and Land Development.The company engages in the wholesale water production, storage, treatment, and distribution systems; wastewater collection and treatment systems; development of master-planned community; and oil and gas leasing business.

It serves domestic, commercial, and industrial customers in the Denver metropolitan region.Pure Cycle Corporation was founded in 1976 and is based in Watkins, Colorado.

Show Full description

1.b. Last Insights on PCYO

The recent 3-month performance of Pure Cycle Corporation was negatively impacted by the lack of commercial development at Sky Ranch, a key growth driver. Despite promising tap fees and land sales, the company's revenue streams from the oil & gas industry have been stagnant since 2018. The absence of significant progress in commercial development has hindered the company's ability to generate substantial revenue, leading to a disappointing performance.

1.c. Company Highlights

Last Price	11.39
Change Percentage	-3.96%
Open	11.74
Previous Close	11.86
Market Cap ( Millions)	274
Volume	35755
Year High	14.25
Year Low	9.65
M A 50	11.08
M A 200	10.64

FCF Yield	2.00%
Dividend Yield	0.00%
ROE	10.19%
Debt / Equity	0.26%
Net Debt / EBIDTA	-67.76%
Price To Book	2.01
Price Earnings Ratio	20.15
Price To FCF	50.0
Price To sales	9.99
EV / EBITDA	12.55

2. Pure Cycle's Resilient Financial Performance Amidst Housing Headwinds

Pure Cycle's Q4 results were its strongest quarter, with net income and earnings per share exceeding expectations, driven by strong oil and gas royalty income from the completion of additional wells. Revenue segments showed continued growth, particularly in recurring revenue segments, with the Water Utility segment experiencing a 22% CAGR in customer growth. The company's annual revenues are around $1,600 per connection, with a total potential of $2.5 billion in top-line revenue. Earnings per share came in line with estimates at '-0.01' relative to expectations.

Publication Date: Nov -30

                                    📋 Highlights
                                    25 Consecutive Quarters of Profitability::
                                                Sustained profitability driven by recurring revenue growth and oil & gas royalties.
Water Utility CAGR::
                                                22% customer growth (annual revenue ~$1,600 per connection; total potential ~$2.5B top-line revenue).
Land Development Visibility::
                                                Phase 2D/2E progress with Flow Funding Agreements (3 installments per lot delivered) despite housing headwinds.
2026 Revenue Catalysts::
                                                40 single-family rentals under contract (97% occupancy) and oil & gas royalty gains from Lowry Ranch permits.
Infrastructure Milestones::
                                                Sky Ranch K-12 campus completed; $700M+ land development monetization and 100% water reuse facility by 2028.

                                

Segment Performance

The Land Development segment faced challenges due to housing headwinds and regulatory issues, resulting in lower sales. However, the company is working on completing Phase 2D and has visibility for Phase 2E. The builder contracts are structured in a way that provides a steady stream of revenue, with payments made in three installments for each lot delivered. As Mark Harding noted, "our percent completion model allows us to dial up and down to match market demand, with payments made in increments for each lot delivered."

Growth Prospects

Looking forward, the company expects a significant increase in oil and gas deliveries in 2026, driven by the completion of permits on the Lowry Ranch. The single-family rental segment is also expected to see substantial growth, with 40 homes under contract and deliveries starting in 2026. The company's focus on recurring revenue growth and its ability to adapt to market headwinds position it for continued growth and profitability.

Valuation

With a P/S Ratio of 9.98 and an EV/EBITDA of 12.54, the company's valuation suggests that investors have high expectations for its growth prospects. The ROE of 10.19% and ROIC of 4.93% indicate that the company is generating returns on its investments. The Net Debt / EBITDA ratio of -0.68 suggests that the company has a strong balance sheet and is well-positioned to invest in its growth initiatives.

Outlook

The company's short-term outlook includes continued growth in the Water Utility segment, with 2,500 units anticipated by the end of the period. Land development is expected to reach 30% completion, with commercial lots adding to revenue. The single-family rental segment is expected to reach 100 units in the short-term. Long-term, the company expects to monetize its net revenues from land development, reaching $700 million, with recurring revenue of $15-16 million.

3. NewsRoom

Pure Cycle Corporation (PCYO) Q4 2025 Earnings Call Transcript

Nov -13

Source: seekingalpha.com

Pure Cycle Announces Financial Results For the Year Ended August 31, 2025

Nov -12

Source: globenewswire.com

Pure Cycle Corporation Announces Dates for Year End 2025 Earnings Presentation

Nov -05

Source: globenewswire.com

Pure Cycle Corporation to Present at the ThinkEquity Conference on October 30th

Oct -23

Source: globenewswire.com

Pure Cycle Corporation (PCYO) Q3 2025 Earnings Call Transcript

Jul -10

Source: seekingalpha.com

Pure Cycle Announces Financial Results For the Three and Nine Months Ended May 31, 2025

Jul -09

Source: accessnewswire.com

Pure Cycle Corporation Announces Dates for Q3 2025 Earnings Presentation

Jun -30

Source: accessnewswire.com

Pure Cycle Corporation Announces Annual Investor Day and Virtual Q&A Session

Jun -27

Source: accessnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.40%)

6. Segments

Water and Wastewater Resource Development

Expected Growth: 8.5%

Growing demand for sustainable water management solutions, increasing adoption of eco-friendly practices, and government initiatives promoting water conservation drive the growth of Pure Cycle Corporation's Water and Wastewater Resource Development segment.

Land Development

Expected Growth: 10.3%

Growing demand for single-family and multi-family homes, increasing urbanization, and strategic land acquisition and entitlement processes drive Pure Cycle Corporation's Land Development segment growth.

Single-family Rental

Expected Growth: 4.5%

Growing demand for single-family rentals, driven by increasing housing costs and changing demographics, coupled with Pure Cycle Corporation's diversified portfolio, provides a stable source of income and attractive investment opportunity.

7. Detailed Products

Water

Pure Cycle Corporation provides water for municipal, industrial, and agricultural uses.

Land Development

The company develops land for residential, commercial, and industrial uses.

Wastewater Treatment

Pure Cycle Corporation offers wastewater treatment services for municipal and industrial clients.

Water Recycling

The company provides water recycling services to conserve water and reduce waste.

Landfill Leachate Treatment

Pure Cycle Corporation treats landfill leachate to protect the environment.

8. Pure Cycle Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Pure Cycle Corporation operates in the water industry, which has few substitutes. However, the company's water conservation efforts and efficient use of resources may reduce the threat of substitutes.

Bargaining Power Of Customers

Pure Cycle Corporation's customers are primarily municipalities and industrial users, which have limited bargaining power due to the company's unique water conservation solutions.

Bargaining Power Of Suppliers

Pure Cycle Corporation relies on a few key suppliers for its water treatment and infrastructure needs. While the company has some bargaining power, suppliers may still exert some influence.

Threat Of New Entrants

The water industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This limits the threat of new entrants for Pure Cycle Corporation.

Intensity Of Rivalry

Pure Cycle Corporation operates in a competitive industry, but its focus on water conservation and efficient use of resources helps to differentiate it from rivals.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	5.80%
Debt Cost	3.95%
Equity Weight	94.20%
Equity Cost	8.71%
WACC	8.44%
Leverage	6.15%

11. Quality Control: Pure Cycle Corporation passed 3 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Aris Water Solutions

A-Score: 6.0/10

Value: 6.0

Growth: 8.6

Quality: 4.7

Yield: 5.0

Momentum: 8.5

Volatility: 3.3

1-Year Total Return ->

Artesian Resources

A-Score: 5.7/10

Value: 6.2

Growth: 4.7

Quality: 5.3

Yield: 7.0

Momentum: 2.0

Volatility: 9.3

1-Year Total Return ->

SJW

A-Score: 5.5/10

Value: 6.4

Growth: 5.6

Quality: 6.9

Yield: 4.0

Momentum: 3.5

Volatility: 6.7

1-Year Total Return ->

Pure Cycle

A-Score: 5.0/10

Value: 2.9

Growth: 6.3

Quality: 8.2

Yield: 0.0

Momentum: 5.5

Volatility: 7.3

1-Year Total Return ->

Middlesex Water

A-Score: 4.9/10

Value: 3.7

Growth: 5.7

Quality: 6.4

Yield: 4.0

Momentum: 2.0

Volatility: 7.7

1-Year Total Return ->

Global Water Resources

A-Score: 4.9/10

Value: 4.0

Growth: 4.8

Quality: 6.6

Yield: 4.0

Momentum: 2.0

Volatility: 7.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

22.14%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

8.44%

Pure Cycle Corporation - US7462283034

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on PCYO

1.c. Company Highlights

Better Quality

Lower Yield

Expensive

Higher Growth

Average Growth

2. Pure Cycle's Resilient Financial Performance Amidst Housing Headwinds

Segment Performance

Growth Prospects

Valuation

Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.40%)

6. Segments

Water and Wastewater Resource Development

Expected Growth: 8.5%

Land Development

Expected Growth: 10.3%

Single-family Rental

Expected Growth: 4.5%

7. Detailed Products

Water

Land Development

Wastewater Treatment

Water Recycling

Landfill Leachate Treatment

8. Pure Cycle Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Pure Cycle Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

11.39$

Current Price

11.39$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA