starsearcher40 wrote: Blueboy thank you. What an EXCEPTIONAL post! You've stated the numbers in a very clear and very accessible way which is truly helpful.
So the question then is "why" has OGI's share price been so out of sync with its peers? I go back to the post I put out about the "Penalty Box Play" (
Click here to read ) This phenomenon is absolutely real and completely applicable to the OGI scenario. And if you want an endorsement or view into whether or not they deserve to be out of the penalty box, look no further than the bought deal. You can bet on a couple of things here. First, no one would underwrite a bought deal unless they were damn sure that the company was fully viable and completely onside. Secondly, with the valuation currently low, there is no doubt that the bought deal will be fully subscribed including the overallotment.
The numbers you've presented here are
SO compelling, it's actually causing me a (nice) problem, in that there is certainly a LOT of money to be made in the stock, and not just on the quick flip. As the market takes OGI out of the penalty box, and readjusts the share price accordingly, as you said, the rise isn't based on "hoped for" new developments. It's just a matter of playing catch up, which it can now easily do, and is an extremely potent rise scenario.
The "catch up" pricing? $12.50 as you've suggested? That certainly highlights the gap between "here and there", and the huge amount of money to be made on the rise. That "nice problem" might now include not being so ruthless on the flip, and giving the stock time to go through that catch-up phase. I'm not a patient person in the market, and I don't think this catch-up phase is going to take long at all, but flipping out at $5.00 (yes, profit is profit) may be leaving the meat of the rise on the table. Selling at $5.00 when a couple of weeks later it is $10.00 is never fun. Been there done that. Uggh!
So with that, I think I'm going to entertain a slightly slower timeframe, multi-week, rather than the quick multi-day flip. There's
serious money to be made here. Just don't tell Falcon I'm actually starting to like the company and the numbers and the potential here. He'll be crowing so much it could quickly become insufferable! ;)
blueboy wrote: For this comparison, I will use Aurora Cannabis (ACB) and Aphria (APH). I won't include Canopy (WEED) in this comparison, since WEED is so much larger than these other LP's, but ACB and APH should make my point well enough.
I am a numbers guy, so here goes (numbers are as close as I could figure, so check them yourselves, of course). I got the revenue numbers from the latest reported quarters for each company in their news releases:
(1) ACB's revenue for their last reported quarter was $8.3 million. ACB's market cap was $3.0 billion at the close today.
(2) APH's revenue for their last reported quarter was $6.17 million. APH's market cap was $2.1 billion at the close today.
(3) OGI's revenue for their last reported quarter was $1.92 million. OGI's market cap was $440 million at the close today.
** Using ONLY the last reported revenue for each company as a guide:
(4) If you use the ratio of ACB revenue to APH revenue and apply it to ACB's $3.0 B market cap, it says that APH's market cap should be about $2.23 billion. APH's market cap actually sits around $2.1 billion right now, so this comparison method seems pretty accurate. If ACB and APH have very similar RELATIVE valuations, then other similar companies (like OGI) should have similar RELATIVE valuations as well.
5) If you use the ratio of ACB revenue to OGI revenue and apply it to ACB's $3.0 B market cap, it says that OGI's market cap should be about $694 million.
(6) If you use the ratio of APH revenue to OGI revenue and apply it to APH's $2.1B market cap, it says that OGI's market cap should be about $653 million.
** Now, does anyone else (other than me, of course) find it fascinating how close the results are from points (5) and (6)? Because the two valuations are so close to each other, let's use the average of the two, or $674 million.
** The $674 million market cap for OGI would represent an increase of 53.2% over OGI's current valuation. WOW! Now, this is just to give OGI the same RELATIVE valuation as ACB and APH. I am not saying that ANY of these companies are PROPERLY valued right now (that is another separate discussion), but RELATIVELY their valuations should compare well, at least in my opinion, as they are very similar companies and their sizes are different by an order of magnitude.
** Applying the 53.2% increase to OGI's closing price of $4.10 today, gives a projected price of $6.28 per share. Another WOW!
***** Now, remember that OGI's last revenue numbers were put out when OGI had a production capacity of 25,000 kg / year (I guess they are still at that level), BUT they just announced $50 million in financing to more than DOUBLE their capacity to 65,000 kg / year.
*****Future revenues figure to more than double (so let's call it $4 million, although it will likely be higher than that) along with OGI's increase in production, SO if we use ACB's and APH's last reported revenues and current market caps again as a guide, that would mean that OGI's expected RELATIVE share price would then be over $12.50 per share.
Now, I know that is A LOT to digest (never mind for me to calculate and type out), but the bottom line is that it looks to me that OGI is COMPARATIVELY significantly undervalued, as compared to two of its larger (but very similar) peers.
I already have all the OGI shares I want to own, but I wanted to share my numbers with the group so people can pick holes in it. I think this comparison explains the recent share price action, as well as some of the large share purchases by houses like Canacord (of course CANAcord is into cannabis stocks). This comparison also shows that there is A LOT of room for OGI's share price to rise, just to catch up (or even come close to) the relative valuations of ACB and APH.
Thank you to anyone who actually got all the way through this long post. I know that numbers aren't for everyone, but it is how I evaluate things.
Well group, pick away, and give me your feedback... I can take it :)
BB