Valens GroWorks Corp Reports Record Q1 Results, Share Price Up 225% Year-to-Date

Valens GroWorks Corp Reports Record Q1 Results
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Valens GroWorks Corp Is the Largest Cannabis Extraction Company in Canada

Valens GroWorks Corp (OTCMKTS:VGWCF, CNSX:VGW) “graduated” in the first quarter of 2019, evolving from its ramp-up in commercial production. And investors are pleased with what they are seeing; Valens GroWorks stock is up 225% since the start of the year and continues to have great momentum.

In addition to reporting record first-quarter results, the Kelowna, British Columbia-based cannabis extraction company has a strong balance sheet and has announced a number of new extraction partnerships.

In the first quarter, it also increased its annual extraction capacity to 240,000 kilograms (roughly 530,000 pounds) of dried cannabis, to prepare for increased customer demand. This makes Valens GroWorks the largest cannabis extraction company in Canada.

Valens GroWorks Corp Overview

Valens GroWorks Corp is a multi-licensed, vertically integrated provider of cannabis products with a key focus in four areas: production development, formulation, testing, and extraction. (Source: “Corporation Presentation,” Valens GroWorks Corp, last accessed April 30, 2019.)

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When it comes to testing, cannabis growers rely on Valens to check for potency, pesticides, metals, toxins, and cannabinoid profiles. Most of the biggest cannabis players in North America rely on Valens GroWorks to help them process their marijuana.

Valens is the only company with a wide variety of extraction methods, allowing it to create more end products and helping it meet a larger number of its customers’ needs.

Extraction involves taking dried cannabis through various stages of production. For a fee, the company will process dried cannabis to crude oil and process that oil to various refined stages.

For a fee or share of revenue, Valens GroWorks will also formulate and develop products for the market. Those white label products include vapes, beverages, edibles, topicals, capsules, and tinctures.

Some of the cannabis companies that Valens currently has renewable extraction partnerships are Canopy Growth Corp (NYSE:CGC), Tilray Inc (NASDAQ:TLRY), Hexo Corp (NYSEAMERICAN:HEXO), OrganiGram Holdings Ltd (OTCMKTS:OGRMF, CVE:OGI), Green Organic Dutchman Holdings (OTCMKTS:TGODF, TSE:TGOD), and Harvest One Cannabis Inc (OTCMKTS:HRVOF, CVE:HVT).

Valens extracts for cannabis companies with a collective market cap of $45.0 billion.

Valens GroWorks Corp Stock

Valens GroWorks Stock Information
Market Cap $377.8 million
Beta 0.58
52-Week High $3.64
52-Week Low $1.04
Shares Outstanding 93.1 million
Float 59.2 million
50-Day Moving Average $2.54
200-Day Moving Average $2.28

(Source: “Valens GroWorks Corp. (VGWCF),” Yahoo! Finance, last accessed April 30, 2019.)

Valens GroWorks stock has been trending steadily higher in 2019. Thanks to stellar first-quarter results, VGWCF stock hit a new intra-day high on April 26 of $3.58, for a year-to-date gain of 225%.

Chart courtesy of StockCharts.com

Valens GroWorks Reports Record Q1 Results

On April 24, Valens GroWorks reported record financial results for its first quarter ended February 28. (Source: “Valens Reports Record $2.2 Million In Revenue In The First Quarter Of Fiscal 2019,” Valens GroWorks Corp, April 24, 2019.)

Revenue increased from zero a year earlier to $2.2 million, while gross profit increased from zero to $850,525 in the same period.

As of February 28, Valens had a strong balance sheet, with $20.6 million in cash and short-term investments, and a net working capital position of $26.4 million. In the second quarter, the company raised $43.1 million in gross proceeds through bought deal financing.

In the first quarter of 2019, Valens GroWorks added four new extraction partnerships and processed 1,796,000 grams (roughly 3,960 pounds) of dried cannabis and hemp biomass.

In the second quarter, Valens GroWorks added an additional two extraction partnerships and increased its extraction, post-processing, and white label product development footprint from 25,000 square feet to over 50,000 square feet.

In the first 55 days of the second quarter, the company processed 4,976,000 grams (roughly 10,970 pounds) of dried cannabis and hemp biomass, a 177.1% increase from the total biomass processed in the first quarter.

CEO Tyler Robson said the following:

We expect Valens’ position as the world’s leading production partner to the cannabis industry to strengthen, accelerate and grow in both the near and long-term. Our ongoing investments in the business will ensure we have a platform to support this anticipated significant increase in volumes and revenues throughout the remainder of fiscal 2019 and beyond.

(Source: Ibid.)

Valens GroWorks has a competitive advantage over its peers because of the following reasons:

  • High Margins: It operates in the highest-margin subsector of the cannabis industry, with low variability in costs.
  • High Cash Flow: It has substantial, reoccurring agreements with leading producers, including Tilray, Canopy Growth, and OrganiGram.
  • Proprietary Technology and Processes: Its decades of experience have resulted in a best-in-class proprietary extraction process.
  • Most Diverse Extraction Capabilities: It provides the widest variety of extraction techniques, allowing its customers to produce the largest range of products.
  • First-Mover Advantage: It was granted the first Dealer’s License to process cannabis, allowing it to easily adapt to an ever-changing landscape.
  • Customized Product Development: It allows for the production of a wide array of concentrates, topicals, vapes, beverages, tinctures, edibles, and capsules.

(Source: Valens GroWorks Corp, op cit.)

Analyst Take

Valens GroWorks Corp’s first quarter was a key period for the company as it accelerated its ramp-up to commercial production. This has taken Valens from being a cannabis company with potential to a cannabis company with revenue.

In the remainder of 2019, look for Valens to expand its operations in Kelowna; expand its geographic reach (including exporting globally); receive its European Union GMP certification; obtain its organic certification; launch beverages, edibles, and a vape line; and announce various multi-year extraction and product development contracts.

Clearly, there are many reasons to keep Valens GroWorks stock on your investing radar.