MariMed Inc: Up 500% YOY but Tiny Pot Stock Can Still Double or Triple

Don’t Overlook MRMD Stock

While we wait to see if the Joe Biden administration will deliver on federal decriminalization of recreational marijuana, Connecticut recently became the 19th state to legalize the drug.

State legislatures have been jumping on the marijuana express because millions of dollars of extra tax revenues are at stake.

A micro-cap play on the U.S. marijuana sector with tremendous capital-appreciation potential is MariMed Inc (OTCMKTS:MRMD), a vertically integrated producer of medical and recreational cannabis.

With facilities built or in development in six states—Delaware, Illinois, Maryland, Massachusetts, Nevada, and Rhode Island—I like MariMed stock’s prospects at this early stage of the company’s growth.

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MariMed Stock Up 500% Year-Over-Year

At first glance, MRMD stock’s 500% year-over-year rise appears overheated, but consider that it rallied from an extremely low price of about $0.13 a year ago.

Shares of MariMed Inc traded at a 52-week high of $1.20 on June 3 before pulling back by 28% to their current sub-$1.00 level.

MariMed stock is well off from its record $5.80 high after the frenzy-buying triggered by the legalization of recreational marijuana in Canada in October 2018.

Chart courtesy of StockCharts.com

Over the past year, MRMD stock has managed several channel breakouts. A breakout from $1.00 in May failed to hold, and MariMed stock has moved back to the previous channel. Look for support at $0.55 to $0.60, representing the channel support.

I’m not convinced that MRMD stock will retest these lower levels, but if it does, investors might want to take the opportunity to enter or add to their positions.

If MariMed stock can recover to $1.20, there’s a chance it could move toward $1.50 to $2.00.

Chart courtesy of StockCharts.com

First-Quarter Results Point to Strong Growth

MariMed reported its highest quarterly core revenue of $24.6 million in the first quarter of 2021, representing a jump of 230% year-over-year. (Source: “MariMed Q1 2021 Results Reflect Highest Core Cannabis Revenue and Profitability,” MariMed Inc, May 17, 2021.)

The company’s revenues have been growing at a run rate of about $100.0 million for 2021 and could accelerate, depending on the economic reopening.

Fiscal YearRevenues (Millions)Growth
2016$3.6N/A
2017$5.170.3%
2018$11.995.3%
2019$45.6284.8%
2020$50.911.6%

(Source: “MariMed Inc.” MarketWatch, last accessed July 22, 2021.)

It will be imperative for MariMed to control its cash burn until the company can deliver consistent earnings before interest, taxes, depreciation, and amortization (EBITDA) income and profitability.

2020 did see MariMed Inc produce EBITDA income of $16.7 million, following two consecutive years of negative EBITDA.

Based on its adjusted EBITDA income of $7.6 million in the first quarter of 2021, MariMed is on its way to beat its 2020 EBITDA.

Fiscal YearEBITDAGrowth
2016$877,480N/A
2017$490,340-44.1%
2018-$3.4 Million-786.5%
2019-$37.7 Million-1,019%
2020$16.7 Million144.4%

(Source: MarketWatch, op. cit.)

The growth in EBITDA income helped MariMed Inc deliver generally accepted accounting principles (GAAP) earnings-per-share (EPS) profits for the first time.

Based on its profits of $0.01 per share in the first quarter, the company is on track to ramp up its profitability this year.

Fiscal YearGAAP Diluted EPSGrowth
2016-$0.0090.5%
2017-$0.01-171.1%
2018-$0.07-586.4%
2019-$0.39-450.2%
2020$0.01101.7%

(Source: MarketWatch, op. cit.)

The company’s free cash flow (FCF) remains negative. That’s not surprising, but MariMed Inc did significantly cut its annual FCF loss to $1.4 million in 2020.

In 2021, the company’s prospects for positive FCF are realistic. The first quarter saw MariMed report $6.8 million in cash flows from operations.

Fiscal YearFCF (Millions)Growth
2016-$3.6N/A
2017-$19.2-439.3%
2018-$11.838.4%
2019-$34.3-190.1%
2020-$1.496.0%

(Source: MarketWatch, op. cit.)

Analyst Take

Based on its first-quarter report, MariMed Inc appears set to report much better results for 2021 than for 2020, especially with the economy reopening.

Moreover, insiders seem to be getting more bullish on MRMD stock, adding 550,000 shares over the last six months. (Source: “MariMed Inc. (MRMD),” Yahoo! Finance, last accessed July 22, 2021.)

It might be a good idea to follow what the insiders are doing. In a few years, you don’t want to be looking back and wondering why you didn’t.