The market shares of OrganiGram (NASDAQ: OGI) – a cannabis producer – started 2020 on a high note. The firm recorded an impressive first-quarter number in January, which portrayed that it’s back on the growth map again profit-wise. In reply to the secure print, OrganiGram Stock rose from $2 to $3.50. But past performances alone are probably not the key pointers when it comes to how well OrganiGram might perform in the future. The question you should be asking yourself as an investor is, will be choosing this weed stock turn out to be a substantial long-term investment? To answer this question, here are seven key indicators to note about Organigram before purchasing the stock.
1. Organigram’s Low Product Costs and Solid Capacity
Indeed, when compared to some of it’s more prominent rivals in terms of production capacity, Organigram is no match. But interestingly, it appears to be performing much better overall. Its annual production rate lies around 62,000 kilograms, and by fall this year, the company’s total capacity is expected to be at 113,000 kilograms. While capacity is a critical factor in revenue growth, the cost of producing cannabis is crucial in driving profits. The company spent less on price per gram to cultivate dried flowers, i.e., CA$0.74 or US$0.55 in the last quarter. And this low cost directly reflects Organigram's industry-leading yield with an average of 153 grams per harvest in the 2019 financial quarter.
2. OrganiGram Stocks Boosted by Efficiency
The cannabis sector faced significant losses in 2019, impacting all sector players. However, CBD or marijuana shares have the power to make you reap huge profits or make losses. This sector is not for those who can’t deal with volatility. However, even if you can deal with it, it’s always wise to put in your investments wisely. And this is true, particularly when considering making a small-cap investment on OrganiGram stock.
On the positive side, though, OrganiGram management has an impressive fiscal discipline according to Cannabis Daily. Compared to other marijuana companies that disregard business basics in favor of growth, OrganiGram is meticulous with its approach. During the early stages of the pot market, potential investors may have been ticked off. Today, every business sees this strategy as visionary. Since the company has one cultivating and processing plant, it can now channel more effort into making it more efficient.
3. Perfectly Positioned in the Adult-Use Recreational Cannabis Industry
The most significant opportunity for Organigram today is the adult-use recreational cannabis market in Canada. The company is perfectly positioned, with contracts in place to supply the products in all Canadian provinces. According to the company’s latest financial update, its revenue quintupled to CA$12.4 million or US$9.3 million. The company’s revenues are poised to soar even higher with the awaited launch of cannabis edibles in the Canadian market later in the year. To prepare for this market, Organigram has taken various measures, including working together with Canada's Smart Kitchen in producing premium chocolate products.
4. Major International Deals
The global cannabidiol (CBD) and medical cannabis are poised to make a massive impact on the industry. Organigram has managed to procure a couple of notable partnerships. These will allow it to take full advantage of international opportunities, according to Markets Insider. In one of the definitive agreements, Organigram teamed with Alpha-cannabis to tap into the German cannabis market with more than 5000 pharmacies across the nation. Another deal involving Eviana, a Serbian-based firm where Organigram is set to purchase 25% of the company’s hemp-derived CBD oils. These two partnerships are crucial in its strategy to reach a more extensive European CBD market.
5. A Fascinating partnership with Hyasynth
Besides the significant international deals, Organigram has also invested in Hyasynth, small-scale biotech. This firm is responsible for developing a cannabinoid extraction process through genetically engineered yeast strains. Through this process, the company can now create pure cannabinoids cheaply than the process involving plants.
6. Geographical Advantage Over Peers
OrganiGram has a unique geographical advantage over its competitors because it’s the only marijuana grower company with its headquarters in the eastern Atlantic Province. While provinces such as Labrador, Brunswick and Newfoundland and less populated, the rates of cannabis use among adults is much higher than Canada’s national average. Thus, this gives OrganiGram an upper advantage in these lucrative provinces.
7. OrganiGram is Financially Stable
Another encouraging reasons to purchase OrganiGram stock is that the company is a significant grower, producing peak annual capacities up to 100,000 kilograms. Besides, it has a single cannabis output drawn from its Monkton center. And thus, this aids in minimizing supply chain costs, according to Sean Williams post, a Motley Fool author. Additionally, OrganiGram is stable financially with adequate capital to fund its operations and expenses. The company had $34.1M cash at the end of the quarter and $30M in withdrawn capacity. OrganiGram can experience further upside with the market well-positioned for more retail growth. Most retail sales are set for Quebec and Ontario, which represents sixty percent of Canada's total population. Additionally, the nation legalized Cannabis 2.0 edibles and derivatives, a move that will be a major booster.
Therefore, is OrganiGram a Buy?
Conservative and non-risk-taking investors may fail to see OrganiGram as the right fit for their portfolio. However, as we can see from the seven critical pointers discussed above, OrganiGram possesses some of the highest growth expectations annealed into the company’s share price. Any impediments that obstruct these growth goals can put a negative dent on the company’s stock. But aggressive investors who focus on long-term achievements can find a reason to purchase into OrganiGram stocks. The pot company is currently in great shape as a worthy competitor not only in Canada but in entire Europe. When compared to its peers, OrganiGram's overall valuation appears more robust and attractive. As things stand, the high-flying cannabis stock could continue soaring higher for a while. If you have faith that things are unfolding for the better in Canada’s marijuana industry, then consider investing in OrganiGram stock.
Written by Bill Vix
Read more posts by Bill Vix