This Marijuana Stock Deserves Investor Attention
In this day and age, few industries look as exciting as marijuana. While the momentum in pot stocks seems to have slowed down a bit in recent weeks, the cannabis industry nonetheless remains an investor favorite. Year-to-date, the North American Marijuana Index has surged 28%.
If you already have a portfolio of high-quality marijuana stocks, the rally in the pot industry would certainly be good news. However, if you are just starting out and are looking for pot stocks to invest in, the bull run in marijuana stocks means you’d be looking at some very expensive price tags.
And that’s why today I want to talk to you about Emerald Health Therapeutics Inc (OTCMKTS:EMHTF, CVE:EMH).
Headquartered in Vancouver, British Columbia, Canada, Emerald Health Therapeutics is a licensed cannabis producer. The company is part of the Emerald Health Sciences group and runs a vertically integrated, seed-to-sale operation.
Other than producing dried cannabis, the company also produces and sells cannabis oil products for medical and recreational purposes.
Like many of the lesser-known pot stocks, Emerald Health Therapeutics trades on the Canadian Venture Exchange in Canada. Still, for U.S. investors interested in owning the stock, they can find it over the counter.
One of the main reasons behind the investor enthusiasm toward the cannabis industry is the high earnings growth rates. And on that front, Emerald Health Therapeutics Inc’s numbers do not disappoint.
According to the company’s latest earnings report, Emerald Health generated CA$2.6 million in sales in the quarter ended March 31, 2019. That amount represented a staggering 600% increase year-over-year and a 131% increase sequentially. (Source: “Emerald Health Therapeutics Reports First Quarter 2019 Financial Results; Demonstrates Continued Growth in Sales,” Emerald Health Therapeutics Inc, May 31, 2019.)
Notably, the company increased its medical client base by 40% during the quarter.
Meanwhile, Emerald Health Therapeutics Inc’s net loss narrowed from CA$13.9 million in the fourth quarter of 2018 to CA$3.6 million in the first quarter of 2019.
This kind of performance, particularly the top-line growth, is quite impressive, even by cannabis industry standards. And given how much investors like the industry, you might think that Emerald Health Therapeutics stock must be soaring.
But that’s not really the case. As a matter of fact, EMHTF stock is actually down 12% year to date. Looking further back, we see that, over the past 12 months, the stock has tumbled a whopping 38%.
Emerald Health Therapeutics Inc Stock Chart
Chart courtesy of StockCharts.com
What we are seeing here is a marijuana company that has triple-digit growth rates but experienced a double-digit drop in share price.
In an era when marijuana stocks are known for making astronomical surges, the subdued price level of Emerald Health Therapeutics actually makes it stand out. Right now, EMHTF stock trades at just $1.83 apiece.
And it’s not like the company is running a shaky business. Even though Emerald Health Therapeutics doesn’t make headlines nearly as often as the big players in the marijuana industry, it has nonetheless built a solid business.
Right now, the company has secured pot supply agreements with eight provinces and one territory in Canada. To put this perspective, Canada is a country with 10 provinces and three territories. (Source: “Emerald Health Therapeutics Corporate Presentation,” Emerald Health Therapeutics Inc, last accessed June 27, 2019.)
Also, the company is not standing still, having taken several important strategic steps to further grow its business. For instance, it has teamed up with Village Farms International Inc (NASDAQ:VFF) to form to a 50/50 joint venture named Pure Sunfarms Corporation.
At full capacity, Pure Sunfarms is expected to yield 150,000 kilograms (330,693 pounds) of cannabis annually. Notably, the joint venture is targeting production costs of less than $1.00 per gram.
At the same time, Emerald Health Therapeutics has launched a wholly owned organic cannabis operation in Metro Vancouver. The facilities include 156,000 square feet of greenhouses and 12 acres of outdoor cultivation, and it is purposely built for organic growing.
Given consumers’ fondness for organic products these days, EMHTF’s investment in organic cannabis production could deliver big returns.
Ultimately, no one can predict a company’s stock price movement with certainty. But based on what Emerald Health Therapeutics Inc has been doing, this $1.83 pot stock could see plenty of upside ahead.