Valens Company Inc: Pot Stock Up 105% in 2021 But Still Wildly Undervalued

Valens Stock Bullish on Raft of Positive News

Valens Company Inc (TSE:VLNS, OTCMKTS:VLNCF) has, in just a few short months, turned into one of the most compelling, exciting marijuana stocks. Most investors aren’t familiar with Valens, but that should change soon.

In addition to reporting solid first-quarter results, the Canadian company has announced that it has expanded its domestic footprint, entered the U.S. market through a strategic agreement, launched new products, and submitted an application to uplist its shares to the Nasdaq.

These positive developments have helped lift VLNCF stock considerably in 2021. Currently trading hands at $2.56 per share, Valens stock is up:

• 100% over the last three months
• 75% over the last six months
• 21% year-over-year
• 105% year-to-date

While those are big gains, it’s just the beginning. Valens Company Inc’s entry into the lucrative U.S. market and uplisting to the Nasdaq will bring the stock to the attention of many cannabis investors who aren’t familiar with the overlooked marijuana company.

Chart courtesy of StockCharts.com

VLNCF Stock Overview

Valens is a one-stop shop for other cannabis companies that want to get their products to market.

A biotech company that specializes in cannabis extraction, testing, analytics, manufacturing, and white-label product development, it can process more than 425,000 kilograms (937,000 pounds) of dried cannabis annually. (Source: “Investor Presentation: May 2021,” Valens Company Inc, last accessed June 9, 2021.)

The third-largest third-party cannabis extraction company in Canada, Valens leads the Canadian marijuana market with its full suite of manufacturing capabilities.

From its purpose-built facility in Kelowna, BC, Valens Company Inc manufactures capsules, tinctures, vapes, beverages, concentrates, edibles, topicals, and pre-rolls.

The company is expected to launch more products in the coming quarters, including personal care products like bath bombs and menthol rubs, as well as water drops and premium oils.

These capabilities put Valens Company Inc ahead of other well-known marijuana players such as Canopy Growth Corp (NYSE:CGC), Aurora Cannabis Inc (NYSE:ACB), and HEXO Corp (NYSE:HEXO).

Acquisition of Leading CBD Company

In April, Valens announced that it had entered a definitive agreement to acquire Green Roads and its manufacturing subsidiary for $40.0 million (plus an additional $20.0 million in milestone considerations). (Source: “The Valens Company Enters US Market With Agreement to Acquire Leading CBD Company, Green Roads,” Valens Company Inc, April 27, 2021.)

Green Roads is the largest privately-owned cannabidiol (CBD) company in the U.S.

With the acquisition of Green Roads, Valens gets immediate entry into the U.S. market with a leading CBD health and wellness brand that has an established manufacturing and distribution platform.

The deal also strengthens Valens Company Inc’s capabilities to supply U.S. domestic and global markets with an expanded product offering.

Based in South Florida, Green Roads produces an award-winning lineup of health and wellness products from a variety of categories. such as oils, topicals, ingestibles, personal care products, and pet products.

Green Roads has an extensive distribution network consisting of more than 7,000 retail stores and an e-commerce and marketing platform that has received more than 30,000 five-star reviews across all of its product lines.

Green Roads’ products are available in seven countries, which Valens Company Inc believes will help unlock additional global distribution capabilities, especially in the Asia-Pacific region.

On top of that, Green Roads is one of a small number of U.S. CBD companies that produce their products in their own good manufacturing practices (GMP) facilities. That’s a testament to Green Roads’ dedication to integrity and excellence.

Application to List on Nasdaq

A day after announcing its acquisition of Green Roads, Valens announced that it had submitted an initial application to list its common shares on the Nasdaq. (Source: “The Valens Company Submits Application to List on Nasdaq,” Valens Company Inc, April 28, 2021.)

Jeff Fallows, the president of Valens, commented, “We believe that listing in the US will unlock various opportunities to enhance corporate visibility, increase liquidity and broaden overall awareness of The Valens Company to a larger investor base while driving value for our shareholders.” (Source: Ibid.)

Valens Company Inc expects that the Nasdaq will make a decision on the company’s application by the end of June. 

Strong Start to 2021

For the first quarter of fiscal 2021, ended February 28, Valens announced that its gross revenue increased by 21.4% year-over-year to $21.8 million while its net revenue climbed by 24.7% to $20.0 million. (Source: “The Valens Company Reports Financial Results for the First Quarter of Fiscal 2021,” Valens Company Inc, April 14, 2021.)

The company’s product sales went up by 23.3% to $17.9 million. Despite a decrease in Canadian sales in January and February, Valens’ provincial sales were up by 7.6% from the fourth quarter of 2020.

The company manufactured 1.4 million units of finished goods over the 12 months ended February 28, 2021. It also ended the first quarter with a strong cash position of $49.3 million.

During the first quarter, Valens Company Inc:

• Improved its capital position with the closing of its bought deal public offering on January 29, for total gross proceeds of $39.7 million 
• Expanded its product distribution capabilities and increased its total addressable market with a new license
• Launched new Cannabis 2.0 products
• In partnership with Verse Cannabis, launched three additional vape cartridge flavors
• Manufactured 53 stock-keeping units (SKUs)

Valens expects to begin manufacturing and shipping dried cannabis products in the second quarter of 2021.

Analyst Take

Despite a pandemic-fueled slowdown in Canadian cannabis sales early this year, Valens Company Inc reported significant sales growth. The company expects to continue growing its sales throughout fiscal 2021.

Moreover, as mentioned earlier, Valens recently announced that it’s entering the U.S. market and applied to uplist its shares to the Nasdaq.

Valens stock has performed well in 2021, and the second half of the year could be even better.