Canadian produce company Village Farms International recently completed the takeover of Pure Sunfarms for $60 million, buying out the remaining shares from its prior owner, Emerald Health.
The marijuana industry provides a lucrative opportunity for investors to dip their feet into the stock market, pending legal federalization of the plant by the American government. Village Farms International is the next upcoming business to provide a cheap inroads for prospective investors.
Originally in the produce department, Village Farms partnered with Emerald Health therapeutics for marijuana production, naming the business Pure Sunfarms. Now with the takeover, the company has valuable infrastructure that it is ready to profit off of, with over 9 million acres of greenhouses in its possession.
What does the stock price look like?
Investopedia recently placed Village Farms (VFF) on their list of the best-value marijuana stocks on the NASDAQ. Compared to other marijuana stocks, VFF has a low price to stock ratio, with each stock valued at $11.98 at the time of writing.
A low price to stock ratio may show that the stock is undervalued and that there is room for growth. A stock that is undervalued in a profitable industry such as marijuana, is an attractive investment for investors.
However, the reason for optimism around this stock comes back to the buyout deal. Since the takeover, the stock skyrocketed to 128.47% of its valuation in the past 12 months, when it used to be just under $6 per share, as charted below.
How has Village Farms performed in the Market?
The company posted strong third-quarter results at the end of 2020, with 75% and 81% increases in net sales and growth profit respectively. The company, while it was still under Pure Sunfarms, has also turned a profit of $122.7 million in the nine months prior to 2021. The company has also turned a profit for seven consecutive quarters. Here is a breakdown of quarterly results provided by the company:
The stock has also outperformed its expectations and held up well against its more established competitors in the Canadian market.
While multi-billion dollar companies such as Aurora Cannabis, HEXO, and OrganiGram have had their stocks collapse over the course of the pandemic, Village Farms was one of two companies to see a steep price increase, with the other one being Canopy Growth.
What does the future look like for the company?
Village Farm has employed successful strategies under smart management to achieve the growth we are seeing today. Along with its expansive production scale, which has the potential to run at an even higher capacity than it currently is, the company has branched out into the sale of “Cannabis 2.0” products.
The company has also recently sold 10.9 million shares for approximately $135 million, indicating investor confidence in the company.
The company will be looking to transition away from produce and dive into cannabis full-time as the legalization of marijuana moves closer to becoming a reality. With a solid foundation in North America, the company also has visions to sell its products abroad and compete with major marijuana corporations, such as Canopy Growth Corp. (NASDAQ: $CGC) and Curaleaf Holdings Inc. (OTC: $CURLF).
Is Village Farms a buy?
At its cheap price compared to its other Canadian competitors and the value you get with this price, this stock is absolutely worth the purchase. The stock is also expected to grow in price over the next twelve months, with a high estimate of $26.59 per share.
The company is also transparent in its data and financial deals, with prompt financial reports available to the public on its website every quarter, even providing potential investors the opportunity to meet with executives of the company in one-on-one meetings.
The produce component of this business has kept Village Farms out of the limelight, but as it transitions to the full sale of marijuana, more and more investors will hop on to this stock.
Village Farms already has a strong foothold in the Canadian market and although it is less profitable, it is ready to make the jump to the American market once marijuana becomes legalized.
In the meantime, it may be wise for investors to buy shares of the stock now and hold over the next twelve months as the economy slowly rebuilds as the end of the pandemic approaches. With the federalization of marijuana, the stock is likely to grow and investors will be rewarded for their patience.