Rare Opportunity Investors now have the rare opportunity to buy HEXO for less than the intrinsic value.
Article from the motley fool about HEXO
Zhiyuan Sun
(TMFZhiyuanSun)
Oct 3, 2020 at 5:48AM
Author Bio
. HEXO
HEXO (NYSE:HEXO) is a weed producer that grossly miscalculated the demand for marijuana
but quickly improvised to overcome its headwinds.
The company focuses mainly on three production aspects
-- high-quality cannabis (greater than 20% THC content),
-- value brands,
-- and mass production of low-grade cannabis to squeeze out competitors in the black market.
So far, HEXO has a leading market share of 33% in Canada's second-most populous province,
Quebec. In the first nine months of fiscal 2020,
HEXO nearly doubled its gross revenue year over year, from CA$38.7 million to CA$74 million.
That's even though the company sold a mere 25,427 kilogramsout of its current annual production
capacity of 90,000 kilograms of cannabis in the past four quarters.
As a result of this supply-demand mismatch,
HEXO recognized a massive write-off of CA$111.9 million in goodwill
and CA$42 million in unsold inventory,
and took CA$106.2 million worth of asset impairments in January.
Such non-cash losses did not continue into the third quarter.
Right now, the company has about CA$27.3 million in long-term debt and CA$48.7 million in convertible note liabilities,
which is more than cushioned by its CA$94.3 million in cash and CA$17.4 million in investments.
Despite its resilience, the stock is trading for only 3.4 times price-to-sales and 0.8 times price-to-book-value.
As icing on the cake, HEXO expects to generate positive operating income less non-cash adjustments
(EBITDA) by the end of the first half of 2021.
https://www.fool.com/investing/2020/10/03/2-top-marijuana-stocks-to-buy-for-the-long-term/
At the bottom of the page there is a statement... The Motley Fool recommends HEXO