EnWave Corp: Profitable, Debt-Free Cannabis Play Bucking the Downtrend

EnWave Corp Bullish Cannabis Stock Up 50%, Bucking the Sector Downtrend
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EnWave Corp Up 50% in 2019 & Poised to Surge Higher

EnWave Corp (OTCMKTS:NWVCF, CVE:ENW) is an unjustly ignored cannabis stock that has been forging its own path in 2019. In fact, EnWave stock is up approximately 50% year-to-date and its short- and long-term outlooks remain bullish.

At the end of August, the company reported record third-quarter revenue growth and adjusted-earnings profitability—and it remains debt-free.

Over the last few months, EnWave has inked a licensing agreement with Aurora Cannabis (NYSE:ACB), announced production expansion at its wholly owned subsidiary NutraDried Food Company, LLC, signed commercial license agreements, and received purchase orders for its disruptive dehydration technology.

NWVCF Stock Overview

EnWave Corp is not solely a cannabis play, emerging technology licensing and royalty company, or fast-growing snack business. It is all of these things.

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The Delta, British Columbia-based company’s mission is “to partner with food and pharmaceutical processing companies to help them find solutions to their processing challenges.” (Source: “Corporate Presentation,” EnWave Corp, last accessed November 15, 2019.)

The company’s dehydration machines allow its clients to quickly and uniformly dry organic material.

Legal marijuana has become the most promising opportunity for EnWave’s dehydration machines. The company’s proprietary radiant energy vacuum (REV) technology cuts the drying process days to under eight hours and maintains the quality of the product.

EnWave has signed royalty-bearing licensing agreements with 32 companies, including Aurora Cannabis, Tilray Inc (NASDAQ:TLRY), and Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF, TSE:TGOD). (Source: “EnWave CEO’s Message To Stakeholders,” EnWave Corp, October 3, 2019.)

The company is also pursuing additional royalty partners.

Furthermore, through NutraDried Food Company, the makers of “Moon Cheese,” EnWave is on its way to becoming the dominant shelf-stable dairy snack company in North America.

Moon Cheese can be found in more than 25,000 distribution points in North America, including Starbucks Corporation (NASDAQ:SBUX), Costco Wholesale Corporation (NASDAQ:COST), Whole Foods Market, and Target Corporation (NYSE:TGT). (Source: “Corporate Presentation,” EnWave Corp, op. cit.)

Over the last two years, revenue from NutraDried has more than doubled, and these aggressive growth rates are expected to continue.

NWVCF Stock Information

Market Cap $144.8 Million
52-Week Change 25.7%
52-Week High $2.10
52-Week Low $0.92
Shares Outstanding 110.5 Million
Float 108.6 Million
50-Day Moving Average $1.44
200-Day Moving Average $1.68

(Source: “EnWave Corp (NWVCF),” Yahoo! Finance, last accessed November 14, 2019.)

EnWave & Aurora Cannabis Sign Commercial Royalty-Bearing License for Australia

In October, EnWave announced that it had signed an exclusive, royalty-bearing commercial license agreement with Aurora Cannabis for REV technology in Australia. (Source: “Enwave and Aurora Cannabis Sign Commercial Royalty-Bearing License for Australia and Sublicense With Cann Group Limited,” October 22, EnWave Corp.)

The two companies will work together to pursue sub-licensing opportunities.

EnWave and Aurora have already signed a royalty-bearing sub-license with Cann Group Ltd (OTCMKTS:CNGGF, ASX:CAN), Australia’s first medical marijuana cultivation licensee.

Through the agreement, Cann Group will use EnWave’s REV technology to dry cannabis. Cann Group has agreed to purchase a REV machine from EnWave to start commercial production.

Record Q3 Revenue, Up 49% Year-Over-Year

In late August, EnWave announced its financial results for the third quarter of fiscal 2019, ended June 30. Third-quarter revenue advanced 49% year-over-year to CA$10.1 million. (Source: “EnWave Announces 2019 Third Quarter Consolidated Interim Financial Results,” EnWave Corp, August 29, 2019.)

The company reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of CA$139,000. In the third quarter of last year, adjusted EBITDA was CA$1.3 million. On a year-to-date basis, however, EnWave’s adjusted EBITDA increased 41% from CA$1.6 million to CA$2.3 million.

The company reported a third-quarter consolidated net loss, after taxes, of CA$1.3 million, versus CA$104,000 in the third quarter of 2018. Almost half of that loss was a result of charges (CA$612,000) related to reorganization of sales and marketing.

EnWave’s year-to-date consolidated net loss was CA$1.6 million, compared to CA$1.0 million in the same period last year.

Analyst Take

As the provider of the most advanced dehydration technology, EnWave Corp is starting to get serious attention from big-name cannabis companies. This has helped Enwave’s financial performance over the last 12 months.

On top of that, the company’s management team has been strengthened and it has added manufacturing capacity in order to increase deliveries of large-scale REV machines.

Furthermore, NutraDried has emerged as a snack company powerhouse. This has translated into record product sales for both Moon Cheese snacks and REV machinery.

EnWave’s financial performance over the first three quarters of this year was the best in its history, and management expects this momentum to continue.