Liberty Health Sciences Inc: Why This Low-Priced Pot Stock Could Soar

Why Low-Priced Pot Stock Liberty Health Sciences Inc Could Surge
iStock.com/JohnDWilliams

This Pot Stock Deserves a Look

It’s not easy being a pot stock investor these days. Over the past several months, market sentiment has been rather bearish toward the marijuana industry. And many of the most established marijuana companies have seen sizable drops in their share prices.

The situation looks even worse at the smaller pot stocks. For instance, Liberty Health Sciences Inc (OTCMKTS:LHSIF, CNSX:LHS) saw its share price tumble from $0.75 to $0.40 over the last six months. That was a drop of more than 45%. Ouch!

A plunging pot stock does not really look appealing when investors are turning from “risk-on” to “risk-off” mode. But for those who understand the underlying risks with the marijuana industry, the downturn in Liberty Health Sciences stock might represent an opportunity.

Here’s why.

Advertisement

Liberty Health Sciences Inc Is Growing Rapidly

Liberty Health Sciences is a pot producer and retailer. While the company is headquartered in Toronto, Ontario, Canada and listed on the Canadian Securities Exchange, it operates in the U.S. marijuana market. Moreover, because Liberty Health also trades over the counter in the U.S. under the symbol “LHSIF,” it’s very easy for American investors to own its shares.

Like I said, this is a beaten-down ticker, but if you take a look at the company’s financials, you’ll see that the business is still firing on all cylinders.

Liberty Health Sciences last reported earnings on July 31. In the first quarter of the company’s fiscal-year 2020, which ended May 31, 2019, it generated CA$5.5 million in sales. Compared to the CA$1.1 million of revenue earned in the first quarter of the company’s fiscal 2019, the amount represented a whopping 384% increase year-over-year. (Source: “Liberty Health Sciences Reports Record First Quarter 2020 Results,” Liberty Health Sciences Inc, July 31, 2019.)

The business got more lucrative, too. In the reporting quarter, Liberty Health Sciences generated a gross profit of CA$5.0 million. This marked a staggering 728% increase from its gross profit of CA$606,178 earned in the year-ago period.

The company also had decent liquidity, with CA$5.0 million in cash and term deposits as of May 31, 2019.

Capitalizing on the Sunshine State

One thing worth noting about LHSIF stock is that the company has a strong focus on Florida.

Right now, recreational pot is not legal in the Sunshine State, but the medical marijuana market has been booming. It is estimated that, among the 21.3 million people who live in Florida, approximately six million are qualifying patients. The number of registered patients in the state has already surpassed 260,000. (Source: “Investor Presentation April 2019,” Liberty Health Sciences Inc, last accessed September 12, 2019.)

By being licensed to produce and sell medical cannabis products in Florida, Liberty Health Sciences is well-positioned to prosper.

In fact, the company’s customer base has already been expanding. Consider that, at the end of May 2018, Liberty Health had 4,566 active registered patients. One year later, the number has nearly tripled to 13,052. (Source: “Liberty Health Sciences Inc. (Formerly Securecom Mobile Inc.) Management’s Discussion & Analysis,” Liberty Health Sciences Inc, last accessed September 11, 2019.)

On the production side, the company has completed the cultivation portion of its retrofit activities at its 387-acre “Liberty 360 Innovation Campus” in Florida. This brought an additional 190,000 square feet of greenhouse online.

Adding the 45,600 square feet of greenhouses located at Liberty Health Sciences’ Chestnut Hill Tree Farm LLC location, the company has a combined annual cultivation production capacity of approximately 17,800 kilograms (39,242 pounds).

And that’s just the beginning. LHSIF is making further investments in the current fiscal year to boost its plant yield, aiming to achieve a 25% increase in production.

On the retail side, Liberty Health Sciences recently opened a new 2,700-square-foot store in Panama City, Florida. This marked the company’s 17th dispensary in the Sunshine State.

Liberty Health Sciences Inc (OTCMKTS:LHSIF) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

At the end of the day, it’s hard to say when sentiment will turn bullish toward the marijuana industry.

But when that happens, Liberty Health Sciences Inc’s triple-digit growth rates will likely translate to plenty of upside for LHSIF stock.