Low-Priced Pot Stock With Big Upside Ahead?
At first glance, Goodness Growth Holdings Inc (CNSX:GDNS, OTCMKTS:GDNSF) may seem like a new name to pot stock investors. But the company has actually been around for a while. Up until recently, it went by the name of Vireo Health International Inc.
Vireo Health got into the pot business when it won one of the two vertically integrated marijuana licenses in Minnesota in 2014. Today, it’s a multistate cannabis company that cultivates cannabis in environmentally-friendly greenhouses, manufactures pharmaceutical-grade cannabis extracts, and sells its products at both company-owned and third-party dispensaries.
On June 8, Vireo Health announced that it was changing its name to Goodness Growth Holdings Inc. Then, on June 9, the company’s shares began trading under the new ticker “GDNS” on the Canadian Securities Exchange and “GDNSF” over the counter in the U.S.
“Our evolution to Goodness Growth reflects the progression of our business from a predominantly early-stage, medical-market operator to one of the strongest organic growth generators across recreational-use and medical cannabis markets in the United States,” said the company’s chairman and chief executive officer, Kyle Kingsley. (Source: “Vireo Health Announces Name Change to Goodness Growth Holdings in Conjunction with 2021 Investor Day Events,” Goodness Growth Holdings Inc, June 8, 2021.)
He added, “Vireo always has been and will continue to be a flagship brand of medical products, but this holding company model reflects a much more expansive view of our future and clearly differentiates our plant-touching assets from our science and [intellectual property] incubator, Resurgent Biosciences.” (Source: Ibid.)
One thing that makes GDNSF stock particularly worth considering right now is the company’s Horizon Strategy, which is a growth plan through 2022.
This period is expected to allow Goodness Growth Holdings Inc to generate more substantial revenue growth in the majority of its markets due to the evolving regulatory environment. The company also plans to open six to 10 additional “Green Goods” retail dispensaries.
It’s important to keep in mind that Goodness Growth’s business has already been growing at a commendable pace. Last year, the company generated $49.2 million of total revenue, representing a 64% increase year-over-year. (Source: “Vireo Health Announces Fourth Quarter and Full Year 2020 Financial Results,” Goodness Growth Holdings Inc, March 25, 2021.)
Considering what the economy went through in 2020, due to the COVID-19 pandemic, Goodness Growth’s top-line result was very impressive.
The business became more lucrative, too. In 2020, the company earned a gross profit of $17.1 million, or 34.8% of its sales. In 2019, its gross profit was $7.3 million, or 24.5% of its sales.
Goodness Growth Holdings Inc opened four new Green Goods dispensaries last year, bringing the total number of its operational dispensaries to 15 at the end of 2020.
And the growth momentum continued in 2021.
According to the company’s latest earnings report, Goodness Growth generated $13.2 million of revenue in the first quarter of 2021, marking an 8.8% year-over-year increase on a reported basis. Excluding the company’s former Pennsylvania subsidiaries, its revenue growth would have been 30% year-over-year. (Source: “Vireo Health Announces First Quarter 2021 Financial Results,” Goodness Growth Holdings Inc, May 14, 2021.)
The company’s gross profit continued to improve, too, reaching $5.6 million, or 42.6% of its sales in the first quarter of 2021. In the year-ago period, the company’s gross profit totaled $3.3 million, or 27.0% of its sales.
Moreover, the company has been expanding its footprint. In the first quarter of 2021, Goodness Growth closed on its previously disclosed purchase of four cannabis licenses in Nevada. At the same time, it completed and received regulatory approval for a 110,000-square-foot cultivation facility in Massey, MD and opened its first retail dispensary in Maryland.
That brought the company’s total number of operational dispensaries to 16, and the number will likely continue to rise.
While Goodness Growth Holdings Inc isn’t a big pot company, it has plenty of cash on hand—relative to its size. The company had approximately $40.0 million of cash on its balance sheet as of March 31.
Now, remember the Horizon Strategy mentioned earlier?
That should take Goodness Growth’s business—and likely its stock price—to new heights. According to its growth plan, the company is expected to generate $140.0 to $180.0 million of total revenue in 2022. Considering that Goodness Growth’s 2020 revenue was $49.2 million, its Horizon Strategy is effectively projecting 185% to 266% top-line growth in two years.
In addition, management expects the company to be cash-flow-positive starting in the first half of 2022.
Goodness Growth Holdings Inc (OTCMKTS:GDNSF) Stock Chart
Chart courtesy of StockCharts.com
Looking at the above Goodness Growth stock chart, we see that the stock has retraced quite a bit of its prior gains in recent months. In fact, GDNSF stock is down by more than 40% from its peak reached in early March.
If Goodness Growth Holdings Inc’s growth plan turns out to be successful, investors who get into the stock on its current price weakness could be handsomely rewarded.