HUDSON TECHNOLOGIES INC /NY (HDSN) stock intrinsic value fair value estimate & owner earnings analysis

Hudson Technologies reclaims, purifies and sells refrigerant gases (mostly HFCs and older HCFCs) to air-conditioning and refrigeration contractors, wholesalers and the US military, and also performs on-site refrigerant services. Refrigerant sales are the large majority of revenue. The US Defense Logistics Agency (DLA) is the largest single customer: $38.2 million of 2025 revenue of $246.6 million, down from $53.0 million in 2023. How earnings have behaved. The business is a commodity-price cycle. Cash earnings per share after all costs, with working-capital swings stripped out, were negative in 2018 and 2019 (about -$0.47 and -$0.40) and roughly -$0.08 in 2020, when refrigerant prices collapsed and a $26.3 million inventory write-down hit in 2018. They then rose to $0.71 in 2021 and $2.43 in 2022 as the HFC phase-down under the AIM Act tightened supply, and have fallen each year since: $1.34 in 2023, $0.59 in 2024 and $0.41 in 2025. Before lenders (interest was $10-15 million a year until 2022 and is now negligible), the ten-year median is about $0.46 per share. The AIM Act cut HFC supply by 10% in 2022 and 2023 and by a cumulative 40% for 2024 through 2029, with no further tightening scheduled in the filing before 2029; Hudson's own allocation is only about 1% of the total. What has changed in 2026. Revenue for the first half of 2026 rose to $138.5 million from $128.2 million, but gross profit fell to $32.5 million from $34.9 million (a 23.5% margin versus 27.2%) while SG&A rose to $22.0 million from $17.4 million. Net income was $5.3 million versus $12.9 million, and both quarters were lower (about $0.3 million in the first quarter versus $2.8 million, and $4.9 million versus $10.2 million in the second). Two consecutive weaker quarters are enough for us to start the base case below the ten-year median. Last year's earnings fell 31% per share; the base case starts roughly 48% below 2025's pre-lender level, so it is not assuming a rebound. The three cases (per share, next twelve months onward). Bear: a repeat of the 2018-2020 price collapse, when pre-lender cash earnings averaged about zero. Earnings are $0.10 for a year, about zero for three years, then $0.12 for five years (the DLA business is assumed lost; its contract ran through July 2026, a new five-year award in October 2025 was rescinded while a competitor's bid protest is reviewed, and we could not confirm the outcome), fading to zero over ten more years. Half of the cash is assumed absorbed by inventory write-downs and working capital, as in 2018; inventory was $128.1 million in June 2026. Business worth $0.75, owes nothing, plus $0.28 of cash: $1.03. Base: $0.22 a year for four years, the first-half 2026 run rate, then a straight-line fade to zero over 20 years, reflecting that the company itself expects HFCs to be replaced by lower-warming-potential products and the Montreal Protocol amendment targets an 85% HFC cut by 2047. Reclaimed refrigerant is not subject to the allowance system and a 2024 EPA rule mandates reclaimed HFCs for certain applications, which supports the early years. Business worth $1.90, owes nothing, plus $0.56 of net cash: $2.46. Bull: DLA is retained and margins return to 2024 levels: $0.30 for a year, then $0.61 (the actual 2024 level) for four years, fading to zero over 20 years. Business worth $5.26, owes nothing, plus $0.56 of net cash: $5.82. What was left out: share buybacks (only two years of history), further acquisitions (only small so far), margin recovery in the base case, and any spike like 2022, which came from a supply shock we cannot name as repeating. Balance sheet. Cash was $25.6 million at June 30, 2026 (about 42.2 million diluted shares). The $40 million Wells Fargo asset-based facility had nothing drawn at year-end 2025 (we assume none since) and expires in March 2027, so renewal is a point to watch. We subtract a $1.8 million earn-out liability from acquisitions, leaving about $23.8 million, or $0.56 per share, of net cash. What would make this wrong: a faster margin slide or loss of DLA (below the base case), or prices recovering to 2023-2024 levels (above it). Margin-of-safety price of $1.35. Our confidence in the earnings level is low: it has ranged from -$0.47 to $2.43 per share in ten years and is falling right now. The worst plausible outcome is a repeat of 2018-2020 plus loss of the DLA contract and an inventory write-down on $128 million of stock; with no borrowings and cash on hand the company would survive it, though the bank facility must be renewed in 2027. If we are wrong about margins, the value ranges from about $1.03 to $5.82; if we are wrong about how fast HFC demand fades, the base moves a little either way. The price assumes a four-to-five-year holding period. The company pays no dividend and says it does not expect to, but it returns cash through buybacks. At $1.35, $0.56 is cash, leaving about $0.79 for an operating business that earned $0.41 per share in 2025 and about $0.22 at the 2026 pace; from that price the base path implies 20% a year, with a cushion if the weaker bear path starts to unfold. Previous estimates (base $5.90 in August 2026) were made on a different basis and are not comparable; the business has since shown lower margins and higher costs.