On Monday, Supreme Cannabis Company (TSXV: FIRE) (OTCQX: SPRWF) (FRA: 53S1) reported solid financials for the three and twelve month periods ending June 30, 2018, putting them amongst the top revenue-generating marijuana companies in the industry.
Supreme posted revenue of CAD$8.85 million for the past year, with CAD$3.55 million coming from this prior quarter alone. Sales were CAD$1.56 million, CAD$1.68 million and CAD$2.07 million in FY2018 Q1, FY2018 Q2, and FY2018 Q3, respectively. Therefore, the company has seen consistent revenue growth throughout the year.
Better yet, the company finally saw a positive net income in the most recent quarter of CAD$0.23 million, although the net income was still negative for the overall fiscal year. Many publicly-traded marijuana companies are still in growth mode and are not yet profitable, so this puts Supreme ahead many competitors in this way.
The last quarter net income was due to the substantial efforts the company has made to expand. Throughout the past year, they have ramped up sales through supply agreements, including transactions with Aurora Cannabis Inc. (TSX:ACB), Emerald Health Therapeutics Inc. (TSXV:EMH)(OTC:EMHTF), Cannmart (a subsidiary of Namaste Technologies (OTC:NXTTF)(TSXV:N) ) and BlissCo Cannabis Corp (OTC:HSTRF)(TSX:BLIS).
On March 20, 2018, they completed a CAD$10 million equity investment in Medigrow, a Kingdom of Lesotho-based marijuana distributor, to hold approximately 10 percent ownership stake. Medigrow will distribute Supreme’s medical cannabis oil within Lesotho, and from there it will be exported globally. Analysts are predicting ongoing strong net income growth into 2021.
A significant player in the global cannabis scene
Supreme is a Canadian marijuana producer and global distributor. The company established themselves early on as a significant player within the cannabis market with its licensed producer, 7ACRES, a large greenhouse cultivation facility in Ontario designed to grow premium cannabis at a commercial scale.
Their focus is on producing a top-quality product to sell at a higher price rather than focusing on the lower cost, lower quality product market segment. Since recreational marijuana use is not legal in Canada until October 17, 2018, Supreme has so far focused on the legal medical cannabis market but intends to expand its recreational focus upon legalization. The company also tries to avoid doing business with countries without federal marijuana legalization. For this reason, it has not yet done business with the United States. However, as regulations lift in the U.S., it would surely create new business opportunities for Supreme Cannabis in the states.
Based on the recent history of strong stock market reactions to the news by other companies in the marijuana industry —Tilray, Inc. (NASDAQ:TLRY) is the poster child of recent stock price swing chaos — one might think traders would react in some way to Supreme’s positive financial reports Monday. However, the company’s stock price remained relatively flat both Monday and into Tuesday, closing up around three percent Monday and down 4.00 percent Tuesday to CAD$2.16 per share.
Since last September, the stock has gone up over 40 percent to date, reaching an all-time high this past January of CAD$3.29 per share. Since January, the price has been on the steady decline, but as of mid-August has been back on the upswing.
Analysts place a “Buy” rating on Supreme
Even though the stock market return for Supreme Cannabis might not be as exciting as other companies in the industry, many analysts are placing a “Buy” rating on the stock. In a Tuesday report, PI Financial analyst Jason Zandberg stated that the quarterly report “exceeded his expectations” and thinks the stock is undervalued. He gave it a target price of CAD$4.50 per share for the next year, which would yield over a 100 percent return if it does reach that price.
Other analysts have placed similar price target expectations on the stock, with the mean price target value of CAD$2.95 and the lowest at CAD$2.00 at the time of this writing. That average target price would also support that the stock is undervalued. This is on the contrary to so many other marijuana stocks in this growing industry which are considered overvalued by analysts, making Supreme Cannabis a potential maverick for investors to continue watching.