High Hopes for MedReleaf
Recently, I talked about the massive prospects for the legal marijuana segment that could explode to as much as $48.0 billion in North America by 2027. The tailwinds driving the demand for cannabis will be the continued removal of the laws that make it illegal to smoke up.
From Canada to Europe and parts of the United States, the cannabis market is in its early stages, but, in my view, the payoff will be huge for growers of weed.
A small-cap early entrant in the medical marijuana segment that shows great promise is MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF).
What makes MedReleaf stock one of the top players is its early move into the area as a grower of medical marijuana in Canada. The company is the first—and so far, only—grower that is an ISO 9001- and ICH-GMP-certified cannabis producer. The recognition is significant in that MedReleaf has a leg up as one of the top suppliers of top-quality marijuana that is regulated to high international standards.
MedReleaf just entered a deal to supply medical cannabis to Germany-based Cannamedical Pharma GMBH, a distributor of medical cannabis to pharmacies in Germany. MedReleaf will become the company’s largest supplier.
But like many in the marijuana segment, LEAF stock has been under pressure after the rapid acceleration in the share price that was excessive and euphoric.
LEAF stock is now about 44% from its record high and is worth a look for aggressive speculators looking for a high-growth sector with incredible potential.
Chart courtesy of StockCharts.com
The reality is if the marijuana market can come close to the estimates, there will inevitably be plenty of business to go around. So sticking with a sound company like MedReleaf makes sense, not only for medical marijuana, but for the high-growth recreational marijuana market.
My Bull Case for LEAF Stock
A look at the fundamentals shows that MedReleaf stock is just beginning to ramp up revenues and earnings while lowering its cost structure.
Revenues more than doubled to CA$40.34 million in FY17 (ended March 31), versus CA$19.30 million in FY16.
In the process, MedReleaf managed to increase its gross profits and expand its gross margins to the point where the company is already profitable on a generally accepted accounting principles (GAAP) basis.
The cash cost per gram has also declined from CA$3.23 in FY16 to CA$1.73 in FY17, as LEAF drives efficiencies and a better manufacturing processes. The cost was CA$1.83 in the third quarter or FY18 as MedReleaf dealt with higher capital expenditure (CapEx) costs from expansion.
For FY18, revenues are estimated to rise to CA$44.74 million prior to surging to CA$143.44 million and as high as CA$168.66 million in FY19. (Source: “MedReleaf Corp. (LEAF.TO),” Yahoo! Finance, last accessed March 22, 2018.)
In my view, MedReleaf stock is one of the top players in the marijuana segment and is poised for some explosive growth that could send LEAF stock much higher on the chart.
Based on the growth metrics for the marijuana market, MedReleaf could record some massive demand in the years ahead, which could see the share price retest its previous high and break higher.