Village Farms International (NASDAQ: VFF) is one of the most successful marijuana companies in the cannabis industry. In fact, the company has been one of the best performers when it comes to increasing shareholder wealth with a return of 358% on its stock price since Cannin.com first recommended VFF stock as a ‘Strong Buy” last year. But – why is Village Farms a Top Marijuana Stock for 2021?
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Strong Vote of Confidence for Village Farms in 2021
The company maintains a strong outlook among investors as sales are growing, the company is well-capitalized and the numbers continue to look good. It was of little surprise to anyone when the company was added to the S&P/TSX Composite Index (Consumer Staples sector) on March 22, 2021. Getting added to this index broadens participation in a company’s investor base.
The S&P/TSX Composite includes the largest and most liquid companies on the Toronto Stock Exchange (TSX), currently totaling approximately 220 (of the approximately 1500 listed on the TSX) that meet certain criteria, including for market capitalization and liquidity. This is a strong vote of confidence for Village Farms in 2021 and beyond.
In case you weren’t aware, Village Farms is one of the largest and longest-operating greenhouse growers in North America. Its wholly-owned Canadian subsidiary, British-Columbia-based Pure Sunfarms, has one of the single largest cannabis operations in the world, is a low-cost greenhouse producer, and one of the best-selling brands in Canada.
Pure Sunfarms operates in 70% of Canada’s marijuana market selling branded products in each of the five largest cannabis product categories in Canada – dried flower, pre-rolls, vapes, edibles, and oils – which can comprise as much as 90%1 of market sales. In February, Pure Sunfarms launched its first cannabis-infused edible products, Pure Sunfarms Real Fruit Gummies. But why is VFF a top marijuana stock for 2021?
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Village Farms: A Different Operating Model
Village Farms operates differently from other marijuana players in the market. In fact, the company focuses exclusively on B2B (business to business) sales. It doesn’t operate its own dispensaries or stores but rather relies on its distribution network. In 2019, over 97% of its total cannabis sales were to other cannabis growers which helps them keep costs under control.
The company released its results for the fourth quarter and full year of 2020. A few highlights are:
- Retail branded sales were up 248% year over year at $15.5 million.
- It was the eighth consecutive quarter of net income and ninth consecutive quarter of positive Adjusted EBITDA (earnings before interest, tax, depreciation and amortization).
- VFF was the top-selling brand of dried flower products with the OCS for both the quarter and year ended December 31, 2020.
- Revenue for 2020 jumped 18% year over year from $144.6 million in 2019 to $170.1 million in 2020.
- Net income for 2020 rose 404% from $2.3 million in 2019 to $11.6 million in 2020.
- Income per share rose 300% from $0.05 in 2019 to $0.2 in 2020.
However, Village Farms stock fell almost 17% from when its results were announced and is currently trading at $17.33. This was because analysts expected revenues to come in at $52.5 million. This fall in its stock price can largely be attributed to profit-booking. After a non-stop rally for a year with very little consolidation, this could be the stabilizer that long-term investors in Village Farms were looking for.
Apart from Village Farms, a lot of other marijuana stocks fell in March. One shouldn’t read too much into this. After a run-up of 358%, it is natural that some investors will book a profit. So, is Village Farms a top marijuana stock for 2021?
Bottom Line: Why is Village Farms a Top Marijuana Stock for 2021?
Apart from marijuana, Village Farms also grows tomatoes, cucumbers, and peppers. It has been in business for 30 years and has 500 acres under cultivation. The stock continues to perform and Q4 of 2020 has been Village Farms’ eighth consecutive quarter of profits.
In 2021, Village Farms completed a registered direct offering with certain institutional investors for the purchase and sale of 10.9 million shares for gross proceeds of approximately $171 million, further improving its balance sheet and liquidity position.
Cannin.com analysts have a strong buy rating on the stock with and we continue to see price targets for VFF approaching $20/share. Cannin.com believes that it is very likely Village Farms will breakout after a brief period of consolidation. Village Farms stock is a must buy for your cannabis portfolio and certainly a top marijuana stock for 2021.
Why is Village Farms a Top Marijuana Stock for 2021?
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