Hudson Technologies has gotten torched over the last six months - since August 2024, its stock price has dropped 27.1% to $5.96 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Following the pullback, is now an opportune time to buy HDSN? Find out in our full research report, it’s free.

Why Does Hudson Technologies Spark Debate?

Founded in 1991, Hudson Technologies (NASDAQ:HDSN) specializes in refrigerant services and solutions, providing refrigerant sales, reclamation, and recycling.

Two Positive Attributes:

1. Operating Margin Reveals a Well-Run Organization

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Hudson Technologies has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hudson Technologies has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 16.3% over the last five years.

One Reason to be Careful:

Revenue Tumbling Downwards

We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Hudson Technologies’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 11.5% over the last two years.

Final Judgment

Hudson Technologies has huge potential even though it has some open questions. With the recent decline, the stock trades at 5× forward EV-to-EBITDA (or $5.96 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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