Revenue Generation: Why is this so Important for Hemp and Marijuana Stocks? Analysts predict the cannabis and hemp industry will surpass $75 billion in less than a decade. The time to invest in cannabis and hemp stocks is now. In fact, there’s never been a better time in history to start investing in potstocks. The massive COVID-19 selloffs have gutted the values of nearly every potstock on the market.
Related: Potstock Pick for 2020, GrowGeneration, Reports Record Revenues of $80 Million
Publicly traded cannabis and hemp companies have performance indicators that investors base investment decisions on. Revenue, and the continuance of further revenue generation, is one of the most important indications of a successful cannabis and hemp company that investors focus on in earnings releases and gather peace of mind from. The importance of revenue generation is that it shows if a marijuana company’s performance has stagnated from previous quarters with previous quarter comparisons, quarter-over-quarter comparisons, and year-over-year comparisons. A marijuana company’s revenue generation is also widely tied to the demand for its product or services and their ability to market them correctly. Lastly, if a hemp or marijuana company can’t generate enough revenue for consistent profits, then it will not effectively scale to capture more and more of its market space as time passes.
Related: Generation Z Americans Expected to Lessen Alcohol Sales with Dramatic Shift to Cannabis
The net income of a publicly-traded hemp and marijuana company is garnered through its revenue and is then utilized to determine the Earnings Per Share (EPS). An earnings release and EPS of a company that shows an increase in revenue and profits heavily influence the value of the stock as it indicates the cannabis company’s ability to continue revenue growth and generate a profit. Investors tune in to earnings releases quarterly to find out how the company fared in revenue generation and find out the new EPS numbers. If a company has significantly higher earnings than predicted it will promote vigorous interest by outside investors who decide to invest due to the indication that profits will continue company growth and further continue increased revenue generation.
Related: MariMed Reports Strong Q2 2021 Earnings
When a cannabis company is required to release its financial earnings quarterly, all of its finances are revealed to the public. These earnings releases are what current and potential investors will use to dictate if they should increase their current position with the company or to close their position with the company in fear of further losses. The line between if a company has demand for its product and the ability to continue sales and revenue growth will be very apparent with comparisons to previous quarters within the same year. If a company shows a decline in revenue generation with missed earnings predictions through three straight quarters, then it will be taken by investors as a sign that the company’s lack of stellar revenue generation will not waver.
A marijuana company’s ability to generate a larger revenue and continual profit within the market space that it occupies weighs greatly on the company’s performance in the next quarter. There is a compounding effect if a company misses one or more quarters in a row and continues to not generate enough revenue to make a profit. A company will have significantly less cash on hand to expand and capture a larger percentage of its market from its competitors or first-time buyers in new regions if it fails to generate enough revenue. If a company doesn’t generate a profit and has tapped out of its cash reserves, then it will have to get financed for a debt facility that comes with repayments and interest which will most likely further take away from its quarterly profits. The debt facility, or credit loan, would serve the company as a way to continue routine operations, scale the company up into new regions, expand marketing for its services or products, and swing the company back into the black with further revenue generation.
Related: Canada Generates $186 Million in Recreational Cannabis Tax Revenue in Less than 6 Months
Revenue generation is highly important – especially for cannabis and hemp companies as it is required to ease current investors, attract new investors, scale the business up, and maintain cash flow. It is not only important for marijuana companies to generate consistent amounts of revenue; they also need to generate more revenue after every quarter to demonstrate effective growth. Investors will take notice of a quarterly increase to revenue generation and determine if a company can continue to lead itself into a higher position within its market or further cement itself as a market leader.
Revenue Generation: Why is this so Important for Hemp and Marijuana Stocks?
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Revenue Generation: Why is this so Important for Hemp and Marijuana Stocks?
