People like pot stocks because they have the potential to deliver enormous returns in a rather short time frame. And MediPharm Labs Corp (OTCMKTS:MEDIF, TSE:LABS) just proved that point again.
MediPharm stock debuted on the TSX Venture Exchange in October 2018 and uplisted to the Toronto Stock Exchange in July 2019. Headquartered in Barrie, Ontario, MediPharm also trades over the counter in the U.S. under the ticker “MEDIF.”
While we don’t hear MEDIF stock being mentioned much by CNBC or Bloomberg, earlier investors of this cannabis company are laughing all the way to the bank. Since the beginning of this year, MediPharm stock has surged more than 150%.
Taking a look at MediPharm’s business, it’s easy to see why investors like this pot stock so much.
Instead of just growing and selling cannabis—which is what most pot companies do, MediPharm focuses on the extraction business. It is the first fully-licensed extraction-only cannabis company in Canada.
It has invested in 70,000 square feet of purpose-built facilities, with five primary extraction lines having 300,000 kilograms (661,387 pounds) of annual processing capacity. (Source: “Extracting Value from Opportunity: Q3 2019 Financial Results,” MediPharm Labs Corp, November 12, 2019.)
And thanks to its eight long-term private and white-label agreements, plus various spot agreements, MediPharm is capable of generating a predictable stream of cash flow—something you don’t see that often in the nascent cannabis industry.
It also helps that the counterparties of those agreements include some of the biggest names in the pot business. MediPharm Labs Corp serves Canopy Growth Corp (NYSE:CGC), Cronos Group Inc (NASDAQ:CRON), and Supreme Cannabis Company Inc (OTCMKTS:SPRWF, TSE:FIRE), among others.
Today, the No. 1 reason why investors should check out pot stocks is that these companies tend to have high earnings growth rates. And on that front, MediPharm does not disappoint.
The company reported its third-quarter 2019 financial results on November 12. During the quarter, MediPharm generated CA$43.4 million of revenue, representing a 38% increase sequentially. (Source: “MediPharm Labs Reports Strong, Profitable 2019 Third Quarter While Investing for Future Global Advantage,” MediPharm Labs Corp, November 12, 2019.)
The company also earned a gross profit of CA$14.8 million and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of CA$10.1 million in the third quarter.
Again, this marked a substantial quarter-over-quarter improvement because, in the second quarter of this year, MediPharm had a gross profit of CA$11.3 million and adjusted EBITDA of CA$7.7 million.
One thing that investors are often concerned about is the lack of profitability in the cannabis industry. Because many pot companies are investing heavily to expand their operations, a lot of them are still incurring sizable losses.
That’s another area where MediPharm stock stands out. Even though the company has been making hefty investments for future growth, in the third quarter, it managed to earn net income before tax of CA$5.4 million.
Mind you, this is not the first time that MediPharm Labs Corp turned a profit at the bottom line. In the second quarter of 2019, the company generated CA$4.1 million in net income before tax.
MediPharm Labs Corp (OCTMKTS:MEDIF) Stock Chart
Chart courtesy of StockCharts.com
Will MediPharm Stock Get More Investor Attention?
Despite MediPharm’s achievements, the company is yet to get much mainstream attention because, as I mentioned earlier, in the U.S., MEDIF stock only trades over the counter at the moment.
But that could be about to change. Earlier in November, the company filed an application to list its shares on the Nasdaq. Once approved, MediPharm could get a lot more exposure.
“We are thrilled to be entering the next phase of growth at MediPharm Labs including cross-listing on the NASDAQ, one of the world’s foremost exchanges for emerging markets and technology, such as the burgeoning cannabis sector,” said Chief Executive Officer Pat McCutcheon. (Source: “MediPharm Labs Submits Application to List on NASDAQ,” MediPharm Labs Corp, November 5, 2019.)
“Listing alongside our peers on the NASDAQ will enhance our visibility and access to a larger base of institutional and retail shareholders in the U.S. and globally,” he added. (Source: Ibid.)
Given its extraction-focus, MediPharm Labs Corp is one of the more interesting pot stocks on the market. The company is growing at a rapid pace and is already profitable.
If MediPharm stock successfully lists on Nasdaq, I wouldn’t be surprised to see it get a lot more investor attention.