VFF’s Untapped Cannabis Potential
Village Farms International Inc (NASDAQ: VFF) is a Canada based leading producer of Tomatoes, Peppers and Cucumbers and has been around since 1989. In the recent past it has started focusing on an industry that is set to be lucrative i.e. the Cannabis industry.
VFF Company is now leveraging its more than 30 years of experience as a vertically integrated grower to tap the rapidly emerging cannabis opportunity that is witnessed around the world. Though the industry looks attractive, but the harsh truth is that many smaller names will vanish or be forced to merge with bigger ones possibly on unfavorable terms. Though VFF is small but it has a very strong balance sheet, untapped product potential and effective management makes it a stock worth consideration.
Listed in NASDAQ in 2019, the stock has been going down from that level till March 2020 when it reached close to 2.5 USD. But after March 2020, it has moved up with the broader market and has reached levels of around 18 in March 2021. The 7-fold jump in the stock price in one year is speculative to a large extent, but we need to analyze how the fundamentals look for the company and whether it is worthy of the investor wealth with a medium- and long-term outlook.
A Look at VFF Fundamentals
With a market cap of 1.37B it is one of the Penny stocks in the NASDAQ stock exchange. The profit margin of -1.66% is not encouraging but considering a pandemic year it can be overlooked. The revenue of 155M looks decent for a company with a market cap of just over 1B. The quarterly revenue growth is projected to be moving up 12.4% year over year.
The total cash in the balance sheet of 54.67M is decent for a company of 1B market cap. The revenue of the company has not grown significantly in last 4 years as it has just remained flat from 158M in 2017 to 155M in 2020. Gross profit is also not encouraging as it achieved gross profit of 5M in 2020 from a loss of 7M in 2019.
In summary, the stock has not performed well in terms of revenue or gross profit. Also, the growth projects are not that encouraging. However, if they can make it big in the cannabis industry in the medium term the prospects may change for the company. So, it would be prudent for the investors to have a long term wait and watch policy on this stock and watch from the side-lines for a good entry point if the company shows signs of positive future growth.