Among the thousands of stocks and dozens of industries for investors to choose from, the cannabis industry has outshone most of them in recent years. Over the past year, marijuana stocks belonging to companies with the largest market caps have mostly seen a doubling or tripling of share values.
One of the strongest forces driving this positive marijuana stock trend has been sales growth in the industry.
Estimates of legal weed sales growth from ArcView, a cannabis research firm, project a 26% annual increase through 2021. If projections are on par, this could triple North American legal pot sales between 2016 and 2021 to nearly $22 billion.
Not all markets are created equally in North America; perhaps nowhere has that been more apparent than in noticing the differences between the Canadian and U.S. legal pot industries. When it comes to marijuana, Canada is the clear North American leader, not the United States.
Medical marijuana has been legal in Canada since 2001 and the country is on the cusp of legalizing recreational use of marijuana nationwide, potentially this summer. If and when recreational sales of marijuana are launched in Canada, the industry anticipates adding roughly $5 billion in annual sales.
It’s important to pay attention to the key players among the marijuana stocks companies in Canada – not only their expansionary plans, but, also their operating results.
Take OrganiGram Holdings (NASDAQOTH:OGRMF), for example, who, in spite of having the lowest forward price-to-earnings ration, delivered first-quarter operating results that are bound to make some investors happy.
Take a look at five reasons investors can be happy about OrganiGram’s Q1 report:
1. OrganiGram is among the best of marijuana stocks to invest in considering its patient growth is in the triple digits.
A steady, growing number of medical patients is something for any marijuana stocks investor to be pleased with. It’s true that recreational marijuana will be a more expansive market than medical marijuana, but, medical patient sales are essential for reducing losses and minimizing cash burn. By November 30, the end of OrganiGram’s first quarter, 10,700 patients were registered with the company. Compared to the first quarter patient numbers last year, this reflects a 169% increase.
2. Marijuana stocks company OrganiGram is seeing a rise in its sales of high-margin products.
The irony is that, while OrganiGram’s number of registered patients increased, their year-on-year numbers of dried cannabis sales were in decline. In their first quarter, 195,000 kg of dried cannabis was sold – up from the preceding fourth quarter, but 65,000 grams less than the first quarter of 2017.
What makes this interesting is that OrganiGram’s loss of dried flower sales was more than compensated for by its increase in cannabis oil sales. In the same quarter last year, OrganiGram sold only 77,000 ml of cannabis oil, compared to 178,000 ml in its fourth quarter last year and 419,000 ml in its first quarter this year. Focusing on cannabis oil sales and product diversification is good news for OrganiGram and investors, as oils are both higher profit and higher margin products.
3. The marijuana stocks company reports a well laid path to producing an annual 65,000 kg of cannabis.
Also favorable to marijuana stocks investors and Wall Street is how clearly OrganiGram has mapped out its plans for producing 65,000 kg of marijuana each year.
The company has been in the midst of a four-phase expansion, the second phase of which was to be finished in January. At the completion of the second phase, OrganiGram was anticipating a total run-rate production of 16,000 kg of weed each year. Phase three of the expansion is set for completion sometime in May, raising the annual run-rate output to 25,000 kg. When the fourth phase is finished, that number is expected to double to 65,000 kg per year.
All of OrganiGram’s expansion is being invested in one location, a single growing facility in New Brunswick. The benefit of this strategy is clear: costs are better internalized and minimized without managing construction projects at multiple facilities. The less cash that is lost on these significant expenses, the greater the potential for profiting ahead of competitors, particularly in tandem with a bump in sales of higher margin products like cannabis oils.
4. OrganiGram is an example of a company with marijuana stocks to buy now due to the securing of two recreational supply agreements.
The stock market comes without the security of guarantees, but, it does appear that Canada’s plans to legalize recreational pot are on track. All of the major industry players in Canada have been racing to prepare for the launch of the recreational market and OrganiGram is no different. What does make the company stand out is its affirmation of two memorandums of understanding (MOU) as a supplier, stated in its operating report.
The first MOU, signed with the New Brunswick provincial authority on September 15, is an agreement for OrganiGram to supply the provincial authority with no less than 5 million grams of cannabis per year in anticipation of high demand for recreational use. The implied value of this agreement translates to annual sales between $31 million and $47 million.
The second MOU, signed with Prince Edward Island in January, holds OrganiGram responsible for a minimum annual supply of 1 million grams. In annual sales, this deal should translate to numbers between $6.5 million and $9.8 million. OrganiGram is not the only supplier in these provinces, so its ability to lock down two supply agreements should come as a comfort to marijuana stocks investors.
5. Marijuana stocks company OrganiGram is surprisingly well capitalized.
As of the end of November 2017, OrganiGram reported $22.5 million in cash and cash equivalents. The same report cited the company’s long-term debt around $2.5 million. Yet, between a bought-deal offering in December ($44 million) and a convertible debenture bought-deal financing at the beginning of February ($93.5 million), the company has been able to generate significant capital; the company will be well funded to finish four-phase expansion.
(To learn more about marijuana stocks investment opportunities, read Looking South: Canada Isn’t The Only Place to Invest in Marijuana Stocks.)