Hemp Stock Recommendation: Abacus Health
While most cannabis and hemp stocks are still trading 50-90% below last year’s prices, the hemp industry holds significant promise for 2020 and beyond.
Although we’re still likely several years from the federal legalization of medical marijuana in the USA, the federally legal hemp market has been gaining strong momentum since the signing of 2018’s Farm Bill.
Cannabinoids derived from hemp are typically low in THC and not psychoactive. While the CBD craze is in full swing, there’s a whole host of other medicinally-beneficial cannabinoids, derived from hemp, which will continue to grow in popularity and demand.
However, according to the Brightfield Group, the hemp-derived CBD industry alone is projected to grow to over $22 billion by the end of 2022. This means that there will be plenty of opportunities for investors looking to buy shares in hemp stocks.
As the hemp industry continues to mature, the winners and losers are becoming more and more evident. We believe there are only a handful of hemp stocks with high long-term growth potential and Abacus Health is certainly high on this list.
Hemp Stock Recommendation: Abacus Health
Abacus Health Products, Inc. (ABAHF) specializes in the development and commercialization of OTC topical pain-relieving products infused with CBD. Its brands include CBD Clinic and CBD Medic. CBD Clinic analgesic ointments, oils, and creams provide pain specialists with an entirely new class of products for safe and rapid relief from acute musculoskeletal pain. CBD Medic products are sold direct to consumers through both mass and local retail chains as well as through an e-commerce platform. They’ve also partnered with three-time Football World Champ, Rob Gronkowski.
Should you invest in Abacus Health Products, Inc.?
We’re excited about Abacus Health hemp stock for a couple of key reasons:
- Abacus revenues have grown by 81.8% over the past year
- Abacus earnings are forecasted to grow by 125.8% per year for the next 1-3 years
Abacus raised $38.2 million from the net proceeds received during its public offering in 2019 as well as $1.71 million from warrant exercises.
Abacus has a very strong liquidity position through equity offerings and operational cost-efficiency. Abacus reported a cash balance of $28.2 million at the end of the third quarter in 2019 which is sufficient for them to cover operational costs for the next 12 months. However, this does present some risk given the uncertainty of the overall duration and impact of COVID-19 on the economy. Will 12 months of cash runway be sufficient given this uncertainty? How will this impact the price of this hemp stock in the long-term?
Of course, there are other risks associated with this hemp stock. The share price has had significant volatility over the past few months, shareholders have been diluted in the last year and their market cap is low at CA$95M.
Why do we Recommend Abacus Health Hemp Stock?
According to an announcement made in March 2020, Abacus is in the process to be acquired by Charlotte’s Web (for $68 Million) to become the world’s leading vertically integrated hemp-derived CBD company.
Abacus return on total asset (ROA) was 0.09% which implies that it made a profit of $0.09 on every $100 spent on asset. This is very good as compared to the industry average. Abacus revenue also experienced double-digit growth each year of operation and, finally, declared a positive net income in the third quarter of 2019. The Price to Sales is also very low. In short, the financials are healthy.
For these reasons, we think Abacus, at or near its current price of $2.99 a share, can be a strong buy and hold investment opportunity.
About Cannin: Your Marijuana Investment Experts
Cannin is your trusted resource for information about marijuana and hemp stock investment opportunities. Our global team of experts evaluates all emerging marijuana and hemp stock investing opportunities. We aggregate hundreds of hours of research and provide tips on the best marijuana and hemp stock investments for 2020. We provide the latest marijuana investment and hemp investment news and analysis.
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