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Village Farms: Is this Cannabis Stock a Strong Buy?

Village Farms: Is this Cannabis Stock a Strong Buy?Village Farms (NASDAQ: VFF), is an interesting Canadian cannabis stock which is currently down 18% in value during FY 2020. Similar to most other marijuana companies, Village Farms has been quite volatile in the last 18 months. The question remains: is this cannabis stock a strong buy?

JV with Emerald Therapeutics

Will Pure Sunfarms JV Revive this Struggling Pot Stock?

VFF owns a majority stake of 58.7% in Pure Sunfarms. The latter is a massive marijuana greenhouse operator. The other portion of the stake in Pure Sunfarms is held by Emerald Therapeutics (TSXV: EMH).

Village Farms stock has nearly doubled since April and could be one of the best cannabis stocks for investors to add to their watchlists. The joint-venture with EMH places the hemp stock at an advantage as the lower cost of operations helps the company to stay profitable.

Consistent profitability indicates resilience amid uncertainty

Village Farms: Is this Cannabis Stock a Strong Buy?

Earlier this month, Village Farms reported its second-quarter results. VFF’s adjusted EBITDA came in at $2.3 million, which is lower than the $4.6 million in the same period last year. However, Village Farms has now clocked in positive adjusted EBITDA for the past two quarters, a rarity among pot stocks.

While the bottom-line maintained its momentum, the topline at $47.6 million also saw a 15% year-on-year (YoY) growth. This is the ex-cannabis revenue of Village Farms, which is generated through greenhouse agricultural produce. With $9.6 million in cash at the end of Q2, Village Farms is also in a comfortable position to navigate through clear and present economic uncertainty.

Solid financials and diversification underpin its strength

Village Farms: Is this Cannabis Stock a Strong Buy?

The strong financials of Village Farms and its stake in Pure Sunfarms makes it an appealing investment option. Being part of such a consistently profitable venture instills confidence among investors.

Pure Sunfarms, commands nearly 14% market share in the dried flower segment in Ontario. In the next few months, it also plans to unveil its Cannabis 2.0 range. Additionally, Village Farms has a presence in the fruits and vegetable segment as well and is a diversified cannabis player, making the stock a relatively safe bet for marijuana stock investors.

Expansion into the Asia-Pacific cannabis segment

Village Farms: Is this Cannabis Stock a Strong Buy?

Village Farms is also looking at acquisitions to drive long-term revenue growth. On August 4, the company acquired a 6.6% stake in Australia’s Altum International. Altum is one of the leading cannabinoid platforms in Asia-Pacific.

This strategic move is a part of Village Farm’s larger plan to foray into Australia and New Zealand’s legal marijuana markets. The cannabis stock already has a strong footprint in North America and now aims to gain traction in other international markets.

In a nutshell, Village Farms remains a lucrative option for long-term cannabis stock investors. The company has showcased operational efficiency and its profitability speaks a lot about its business strength. We believe that this cannabis stock is poised for more growth during the rest of 2020 and beyond.

Village Farms: Is this Cannabis Stock a Strong Buy?


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