This Low-Priced Pot Stock Deserves a Look
Most people have never heard of Aleafia Health Inc (OTCMKTS:ALEAF, TSE:AH). But if you are a pot stock investor, this little-known company could represent a serious opportunity.
Let me explain.
Headquartered near Toronto, Ontario, Canada, Aleafia Health Inc is a vertically integrated and federally licensed Canadian cannabis producer. The company not only produces and sells pot, but also operates medical clinics and education centers.
Like many pot stocks, Aleafia stock plunged during the market sell-off earlier this year. But since bottoming in late March, the company’s shares have made some sizable recovery, as the chart shows below.
Aleafia Health Inc (OTCMKTS:ALEAF) Stock Chart
Chart courtesy of StockCharts.com
As of this writing, ALEAF stock trades at $0.37 apiece and has a market capitalization of less than $110.0 million, so it is not exactly big enough to make headlines often in the financial media.
However, if you take a look at the company’s financials, you’d see that this cannabis penny stock actually churns out more impressive growth figures than many of its bigger competitors.
Aleafia Health reported first-quarter 2020 earnings on May 13. For the quarter, the company’s net revenue grew 143% sequentially to CA$14.6 million. (Source: “Aleafia Health Announces $6.4M Positive Adjusted EBITDA, $14.6M Net Revenue in Q1 2020,” Aleafia Health Inc, May 13, 2020.)
The increase was mainly driven by its cannabis operations: Aleafia Health generated CA$13.7 million in quarterly net cannabis revenue. The amount was a 183% increase quarter-over-quarter, and a whopping 2,486% increase year-over-year.
In the first quarter of 2020, Aleafia Health sold a total of 4,992 kilograms (11,005 pounds) of cannabis, which more than tripled the 1,398 kilograms (3,082 pounds) it sold in the fourth quarter of 2019.
The company also managed to expand its gross margin of cannabis net revenue from 80% to 85%. Combining a wider margin with higher sales in its cannabis operations, Aleafia Health’s gross profit before fair value adjustments for cannabis net revenue surged 203% quarter over quarter to CA$11.7 million.
Notably, the company’s active registered patients rose 7.2% in the first quarter to 10,983, and that number is still growing. As of May 12, Aleafia’s patient count was over 12,000.
Now, keep in mind that the COVID-19 pandemic is yet to end, and a lot of businesses still remain closed.
The good news is, Aleafia Health was able to adapt to the new environment very quickly. On March 16, the company moved to conducting all patient consultations through virtual clinic services. Then, on March 26, Aleafia Health launched its last-mile medical cannabis home delivery service.
In the company’s latest earnings conference call, Chief Executive Officer Geoffrey Benic called this new model “a game changer,” saying that “a patient now can be seen, heard and scripted at 9 AM registered by 10 and have their delivery the same day.” (Source: “Aleafia Health Inc.’s (ALEAF) CEO Geoff Benic on Q1 2020 Results – Earnings Call Transcript,” Seeking Alpha, May 13, 2020.)
And we think that, that’s not only convenient but also contactless in this environment of unprecedented time of COVID and ultimately, we think it’s a game changer and as we continue to build out our logistics capability. We’re going to be able to offer this service 24×7, no matter what time of the day, what time of the night we will be – being able to offer this service.
The best part is that this is not the first time for Aleafia Health to deliver promising growth figures. In fact, the company has reported record net revenue for five consecutive quarters.
(Source: “2020 Q1 Corporation Presentation,” Aleafia Health Inc, last accessed June 22, 2020.)
In this day and age, fast-growing businesses tend to be highly sought after.
The cannabis industry is still at an early stage, and Aleafia Health Inc has been expanding its operations. For pot stock investors, ALEAF stock is a name that should not be ignored.