This Marijuana Stock Deserves a Look
If you are on the hunt for a low-priced marijuana stock with big upside potential, then OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI) deserves your attention.
Compared to the big-name pot stocks, OrganiGram seems like a relatively small player in the business, with a market capitalization of just under CA$1.3 billion.
And like many smaller pot stocks, the company is listed on the TSX Ventures Exchange in Canada. Still, it’s possible for American investors to get a piece of the action. That’s because the company’s shares can be bought in the U.S. over the counter.
Unique Market Opportunity
The big question now, of course, is why investors should consider OrganiGram stock over the more popular tickers in the cannabis industry.
The answer is twofold.
First, OrganiGram Holdings Inc has a strong presence in an often-overlooked market, Canada’s Maritime provinces. In particular, I’m talking about New Brunswick, Nova Scotia, and Prince Edward Island.
Compared to the bigger provinces like Ontario, Quebec, and British Columbia, the Maritimes have a lower population. As a result, we don’t really see the big cannabis companies talking about them. But here’s the neat part: in the Maritimes, the average consumer spends much more on cannabis products compared to most other provinces.
You see, Canada legalized recreational marijuana on October 17, 2018. According to data from Statistics Canada, residents of Prince Edward Island on average spent $13.83 each on legal cannabis products in the first six weeks after legalization—the highest amount of any province. (Source: “Atlantic Canadians buying far more pot than rest of country, sales figures show,” Global News, January 25, 2019.)
The second-place finisher was Nova Scotia, where the average resident spent $11.34 on legal pot during this period. New Brunswick came in fourth among the 10 Canadian provinces.
OrganiGram is a licensed producer of cannabis and cannabis-derived products headquartered in Moncton, New Brunswick.
Because pot producers of a similar scale are mostly located outside the Maritime provinces, OrganiGram’s location gives it a unique geographical advantage in serving pot-loving Maritimers.
And as it turns out, New Brunswick—the company’s home province—boasts one of the lowest costs for producing cannabis. In particular, OrganiGram can take advantage of the province’s low and predictable base power rate and cheap real estate costs in its growing operations. (Source: “Investor Presentation,” OrganiGram Holdings Inc, last accessed March 28, 2019.)
OrganiGram Holdings Inc Delivering Triple-Digit Growth Rates
The second reason to check out OGRMF stock is the growth in the company’s business. We know that cannabis companies are some of the fastest-growing ones in the current economy, but OrganiGram’s numbers look impressive even by the pot industry’s standards.
In the first quarter of OrganiGram’s fiscal 2019, which ended November 30, 2018, the company generated $12.4 million in net sales. This was 287% higher than the $3.2 million earned in the fourth quarter of fiscal 2018 and a whopping 419% higher compared to the year-ago period. (Source: “Organigram Reports Record Net Revenue of $12.4 Million Up 287% Sequentially Quarter-over-Quarter; Adjusted Gross Margin of 71%,” OrganiGram Holdings Inc, January 28, 2019.)
As I said earlier, the company is taking advantage of the low-cost production environment in New Brunswick. In the reporting quarter, OrganiGram achieved an adjusted gross margin of 71%.
Worth noting is that, for the first time in its history, OrganiGram became free-cash-flow positive. The company earned $2.9 million in free cash flow in the first quarter of fiscal 2019, as compared to reporting a negative free cash flow of $3.6 million in the prior quarter.
Management is confident about keeping OrganiGram on that growth trend. In the earnings press release, the company said that the net revenue for the second quarter of its fiscal 2019 would be “at least twice that of Q1.” (Source: Ibid.)
Looking further ahead, OrganiGram plans to launch derivative and edible products during the fall of 2019. This could give the company’s financials another solid boost.
OrganiGram Stock Chart
Chart courtesy of StockCharts.com
Because the company isn’t listed on a major U.S. stock exchange, OrganiGram stock remains unnoticed for many investors. But the company has solid fundamentals and its growth rates are nothing short of impressive.
Trading around $6.50, OGRMF stock could see a lot more upside ahead.