Because the potential of the marijuana industry is so enormous, it’s easy to get blinded by the largest players in the space thinking they will command the field and generate the best returns.
Enterprising investors might want to take a different tack, looking beyond the big names for the best growth opportunities. Precisely because the cannabis industry is so wide open at the moment, today’s big deals could be tomorrow’s has-beens, and MariMed (OTC:MRMD), Village Farms International (NASDAQ:VFF), and GrowGeneration (NASDAQ:GRWG) could be the real cannabis winners.
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This tomato seller is making green in more ways than one
Alex Carchidi (Village Farms International): If you’ve ever struggled to grow a tomato plant in the backyard, you can probably appreciate that professional tomato growers with mega-scale greenhouses are a bit more efficient at the process than you are.Â
That’s where Village Farms International comes in, supplying your local supermarket with inexpensive yet juicy tomatoes from its hundreds of acres of indoor produce cultivation space. Lest you get the idea that this company is all about tomatoes, it’s also one of the most successful marijuana growers in Canada, and that’s what makes it an offbeat stock worth a closer look.
Via its subsidiary Pure Sunfarms, Village Farms is selling an ever-increasing volume of cannabis using its decades of indoor cultivation expertise.
For the last four quarters in a row, Pure Sunfarms has grown its revenue from branded products by more than 20% sequentially in the face of hot demand in Canada. In Village Farms’ Q2 earnings report, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from Pure Sunfarms exploded by 192% sequentially. And, Village Farms’ total revenue expanded by 48% year over year, largely powered by cannabis sales.Â
Management is working hard to keep expanding the cannabis business even further. On Aug. 16, the company purchased a small American cannabidiol, or CBD, business called Balanced Health Botanicals for $75 million in cash and stock. The acquisition should lead to around $30 million in new annual sales for Village Farms. More importantly, it now has the supply and distribution infrastructure it needs to start to penetrate a segment of the U.S. market for cannabis.Â
That means investors should expect next year to yield even more revenue than 2021. With growth like that, Village Farms could soon return to turning a quarterly profit. In sum, it’s an exciting time to be a shareholder — and it might even be a favorable time to buy the stock.