Attention Investors: This Small-Cap Cannabis Company Is Already Profitable

The Canadian cannabis market is starting to take shape, and so far, a pyramid of sorts has formed. At the top of the pyramid reside Canopy Growth and Aurora Cannabis. The two juggernauts share about 50% of the domestic market and are numbers two and one (respectively) in production capacity.

Lower on the pyramid, Hexo, Cronos Group, and Aphria are battling each other, and Hexo recently got a boost with its acquisition of Newstrike Brands.

Despite this general pecking order being established, there is enough room for smaller cannabis companies to squeeze in at the bottom of the pyramid. Let’s look at a little-known small-cap pot stock you should know if you are interested in the Canadian pot market: OrganiGram Holdings  (TSXV:OGI).

Already profitable

Organigram’s current market cap sits at about $1.32 billion, which doesn’t come close to that of the industry’s top firms. But the company boasts a production capacity that — once ongoing projects end — will reach up to 113,000 kilograms a year. Note that Cronos’s production capacity is currently around 40,000 kilograms a year and is expected to soar to about 110,000 kilograms a year by next year.

Much like other pot companies, Organigram saw revenues soar during its latest quarter thanks to a lift on the ban of recreational marijuana use. Net sales for the first quarter of 2019 (which ended on November 30, 2018) increased to $12.4 million up from $2.4 million compared to the corresponding period of the previous fiscal year; this represents growth of 419%. The company’s gross margin percentage (excluding fair-value adjustments on biological assets) increased to 71% during the quarter, up from 25% year over year.

Perhaps the biggest story is the fact that, unlike many of its peers, Organigram is actually returning a net profit. The company posted a net income of $29.5 million during the quarter, up from a net loss of $1.2 million year over year. It is essential to note that pot became legal in Canada mid-Q1 2019 for Organigram. The full effects of these new laws, thus, will likely be felt in subsequent quarters. Organigram expects sales to double during Q2 2019.

Reasons to worry?

Of course, everything isn’t peachy for Organigram. The company has also had to rely (somewhat heavily) on bought-deal offerings to fund its growth, and its outstanding shares have ballooned recently. Further, Organigram does not have a very strong international presence and has yet to land a lucrative deal with a partner. In other words, despite making important strides in the industry, Organigram still has its flaws.

Investor takeaway

Organigram boasts a high production capacity (once it reaches its peak), growing sales and profits, and a low valuation by industry standards; the company currently trades at 23.58 times future earnings. Despite its shortcomings, Organigram definitely warrants more attention from investors.

Have you heard about Amazon’s secretive “Project Vesta”?

Few people have… yet some of the greatest minds in the world believe this innovative technology could change the world.

Amazon doesn’t want anyone to know about this top-secret project, but there’s something even Amazon doesn’t know…

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

But you’ll need to hurry if you want to pick up this TSX stock before its name is on everyone’s lips.

To learn more about this exciting technology and dark horse TSX stock before it’s too late, click here now.

More reading

Fool contributor Prosper Bakiny owns shares of Aurora Cannabis. 

Source: The Fool
Attention Investors: This Small-Cap Cannabis Company Is Already Profitable
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts