Valens Groworks Stock Rebounds on Strong Financials
Valens Groworks Corp (OTCMKTS:VLNCF, CVE:VLNS) has been one of the best-performing cannabis stocks, especially during the market-wide rout that was sparked by coronavirus fears.
The S&P 500 and Dow Jones Industrial Average, both barometers of the U.S. and global economies, have experienced huge declines, even after the Federal Reserve announced it was cutting interest rates by 50 basis points.
Valens Groworks, on the other hand, has seen its share price rebound, surging 24% between February 28 and March 4.
The reason? Valens recently reported financial results that saw its quarterly revenue soar. The company’s ongoing profitability is a rarity in the legal marijuana industry. Furthermore, Valens ended the year with a strong balance sheet.
VLNCF Stock Overview
Valens Groworks is the largest third-party marijuana extraction company and the largest white-label product development and manufacturing extract company in Canada.
The company has an annual capacity of 425,000 kilograms (937,000 pounds) of dried cannabis and hemp biomass. (Source: “Investor Presentation February 2020,” Valens Groworks Corp, last accessed March 4, 2020.)
As a cannabis extraction company, Valens does not grow marijuana; it refines it. The oils can then be used in cannabis-infused products like edibles, vapes, topicals, and beverages.
Because of the expected increased demand for its extraction and white-label services, Valens is in the process of increasing its annual capacity to 1.0 million kilograms (2.2 million pounds). That’s a 135% increase from the current capacity.
Valens Groworks Stock Information
|Market Cap||$296.9 Million|
|Shares Outstanding||125.5 Million|
|50-Day Moving Average||$2.5|
|200-Day Moving Average||$2.4|
(Source: “Valens GroWorks Corp. (VGWCF),” Yahoo! Finance, last accessed March 4, 2020.)
Valens Reports Record Financial Results
In February, Valens announced that revenue in its fourth quarter ended November 30, 2019, increased 86% quarter-over-quarter to $30.6 million. That was at the high end of guidance. (Source: “The Valens Company Reports Record Financial Performance in the Fourth Quarter and Fiscal Year Ended November 30, 2019 with Q4 Adjusted EBITDA of $17.7 Million,” Valens GroWorks Corp, February 24, 2020.)
Revenue-per-gram of input in the fourth quarter increased 105% quarter-over-quarter to $1.25. Management said it expects that figure to rise in 2020 as revenue from product development contracts grow in comparison to revenue from extraction contracts.
The company reported fourth-quarter 2019 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $17.7 million, an 80.6% increase from the third quarter of 2019.
Valens ended the fiscal year with cash and short-term investments of $58.7 million and a net working capital position of $88.2 million.
While Valens Groworks Corp is primarily known as the biggest third-party extraction company in Canada, it has been emerging as a white-label manufacturer. In fact, its white-label product contracts now outnumber its extraction contracts. This will benefit Valens as the demand for cannabis-infused products continues to grow.
Because of the coronavirus outbreak, U.S. companies are not expected to generate earnings growth in 2020. Not even the Fed slashing its benchmark interest rate may help with that.
That likely means many stock prices will fall. But because investors like to invest in companies that are profitable, 2020 could be a monumental year for VLNCF stock.
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