Liberty Health Sciences Inc: Shares Down 50% But Record Q2 Points to Huge Upside

Liberty Health Sciences Shares Down 50% Despite Profitable, Record Q2 Results
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Liberty Health Sciences Inc Reports Another Strong Quarter

Liberty Health Sciences Inc (OTCMKTS:LHSIF, CNSX:LHS) has been, like the broader cannabis industry, testing the patience of Wall Street. Since the Great Deflation in cannabis stocks began in early 2019, Liberty Health Sciences Inc has lost approximately 50% of its value.

Most pot stocks deserve to see their share price experience a radical correction, but Liberty Health Sciences stock is not one of them.

The company reported record first-quarter results, reported strong profitable second-quarter results, launched new dispensaries in Florida and Ohio, is increasing its growing capacity, and has announced new partnerships.

That’s everything an investor would hope a successful cannabis company would do.

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Alas, the cannabis sell-off takes no prisoners; every marijuana stock has been experiencing the same fate.

That won’t always be the case though. Eventually, fundamentals will matter, and when they do, astute investors will realize that LHSIF stock is an excellent cannabis stock that has seen its share price be unnecessarily smoked by knee-jerk investors.

On the plus side, that means Liberty Health Sciences stock is trading in an excellent price range. Trading near record lows of $0.36, if this stock gets to its late-2018, pre-sell-off range of $1.20, that would represent an increase of more than 230%.

LHSIF Stock Overview

Liberty Health Sciences Inc produces and sells medical cannabis in Florida. The lowest-cost such producer in the state, Liberty’s state-of-the-art cannabis facilities in Florida cover over 300,000 square feet of growing and production space. (Source: “Investor Presentation, April 2019,” Liberty Health Sciences Inc, last accessed November 4, 2019.)

The company’s annual growing capacity currently totals 14,200 kilograms (31,306 pounds) per year. That number is expected to rise significantly in fiscal 2020. From this harvest, Liberty sells eight brands.

Through fiscal 2019 (ended February 27, 2019), Liberty Health Sciences Inc opened a total of nine dispensaries. That number has continued to grow.

As of the start of November 2019, the company operates 19 dispensaries in Florida. It also has lease agreements in place for 10 other locations and is negotiating on another seven. (Source: “Liberty Health Sciences Reports 2020 Second Quarter Financial Results,” Liberty Health Sciences Inc, October 31, 2019.)

LHSIF Stock Information

Market Cap $118.1 Million
52-Week Change -67.52%
52-Week High $1.22
52-Week Low $0.26
Shares Outstanding 345.2 Million
Float 281.5 Million
50-Day Moving Average $0.32
200-Day Moving Average $0.43

(Source: “Liberty Health Sciences Inc. (LHSIF),” Yahoo! Finance, last accessed November 4, 2019.)

Record Q2 Revenue, Swing to Profitability

On October 31, Liberty Health Sciences Inc announced that its consolidated net sales, for the second quarter of fiscal 2020 (ended August 31, 2019), increased 379% year-over-year to $10.6 million. (Source: Liberty Health Sciences Inc, October 31, 2019.)

The company attributes its huge increase in revenue to the opening of new dispensaries and delivery locations, along with higher same-store sales and an increase in Florida’s registered patient base for medical marijuana.

Liberty Health reported net income for the second quarter of fiscal 2020 of $22.9 million ($0.07 per share), compared to a loss of $5.6 million ($0.02 per share) in the same period last year.

“The second quarter of fiscal year 2020 proved to be the largest sales revenue quarter in the history of our Company,” said Victor Mancebo, interim CEO. (Source: Ibid.)

“Liberty’s continued growth directly ties to the strategic initiatives we have set in place, which has been increasing our Florida production, retail base and delivery footprint along with expanding our product portfolio and brand partnerships.”

As of August 31, 2019, Liberty Health Sciences had $23.9 million in cash and term deposits, compared to $13.2 million as of February 28, 2019.

During the second quarter, Liberty introduced its “Zentient” brand of premium cannabidiol (CBD) and tetrahydrocannabinol (THC) products into all of its dispensaries. The company also launched its “Pretty Pistil” brand.

In August, it sold its “Chestnut Hill Tree Farm” site in Alachua County, Florida and divested itself of its assets in Ohio.

Analyst Take

Liberty Health Sciences Inc is doing everything a marijuana investor would like to see. But because of the Great Deflation in the cannabis bubble, Liberty Health Sciences stock needs to play catch-up.

As mentioned earlier, the company has reported record first-quarter revenue growth, record second-quarter revenue, and a swing to profitability.

It also recently finished construction on its new greenhouse processing and production facility, which resulted in Liberty being the lowest-cost marijuana producer in Florida.

Thanks to its first-mover advantage, Liberty Health Sciences is one of the first companies in Florida to sell whole flower products in all of its dispensaries, reaching monthly sales of more than $4.6 million in August alone.

Liberty expects its sales to continue to grow rapidly as it expands its dispensary footprint throughout the state and launches new products.

It’s only a matter of time until the rest of Wall Street catches on.