Why village farms could make you rich in June and beyond
Village farms (NASDAQ: VFF) is a well-established producer of agricultural products and cannabis that seeks to expand worldwide. His ambitious goal is to become the leading cannabis producer in Canada and strives to capture at least 20% market share in the dried cannabis category.
That dream suffered a setback recently due to somewhat disappointing quarterly results that have caused the stock to lose almost half of its value since February. But investors who buy the plunge on good companies that are temporarily failing are often amply rewarded for their courage. Let’s see why Village Farms stock can make you richer.
Can you count on Village Farms?
In the first quarter of 2021, Village Farms sales increased 63% year-over-year to $ 52.1 million. The increase is mainly attributable to the company’s acquisition of 100% of its cannabis subsidiary Pure Sunfarms, which added $ 17 million in revenue outside of its product segment. At the same time, the company’s profits fell to a marginal loss of a marginal gain.
The unimpressive results were at least in part due to lockdowns initiated by Canadian provinces to tackle a third wave coronavirus outbreak amid vaccine shortages. This has hurt supply chains and forced many retail stores to close. However, Canada is exponentially increasing its vaccination rates right now, so sales are expected to return to normal very soon. Despite the (less severe) lockdowns, Pure Sunfarms generated C $ 76.1 million in revenue and C $ 13.8 million in profit, near the peak of the industry.
This is good news, as Pure Sunfarms is one of the most notable cannabis brands in Canada. Its dried flowers rank first in the country’s most populous province of Ontario in terms of sales volume. Additionally, the company’s vapors, bottled oils and gummies have been on sale since the fourth quarter of 2020.
Canada is not the only country where Pure Sunfarms has cannabis operations. He cultivates 130 acres of land at four facilities in Texas that could be quickly converted to pot production. In addition to this, the company owns a 12% stake in Altum International, which seeks to be commercially active in the CBD sector in East Asia and Oceania over the next three months. Finally, the company invested in DutchCanGrow to obtain one of the 10 licenses to supply legal recreational cannabis in the Netherlands.
But Village Farms isn’t all about growing cannabis. The main activities of the company are growing tomatoes, cucumbers and peppers in greenhouses. It might sound boring, but the company is really good at what they do. In 2020, its agricultural products brought in $ 157 million in revenue. Using the company’s high-tech greenhouse technology, she can grow vegetables using 86% less water and 97% less soil than growing outdoors, resulting in higher yields.
Lots of room to grow
Village Farms shares are currently trading at just 3 times futures revenue, which is much cheaper than the industry average range of 8 to 37. Investors were very excited about the potential of the market. company in February and have offered its shares at nearly 7 times the income in the long term. However, they were disappointed when Village Farms announced first quarter results and its cannabis segment did not perform as expected.
As previously stated, a one-off and temporary decline in cannabis distribution due to stricter coronavirus containment measures is not a good reason to abandon the stock. All in all, given its upcoming return to growth, international cannabis expansion opportunities, and solid revenues to fall back on, this is a top-notch cannabis company for investors to discover. .
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.