After falling as much as 50% in the first half, CVSI stock has been showing signs of a relief rally this week. Let's analyze if CV Sciences Inc (OTCQB:CVSI) has reached the bottom and is ready to move up.
Key Analysis
CV Sciences has been one of the few companies in the CBD industry to have steadily delivered profits over the past quarters. However, the slightest whiff of competition in the industry resulted in a decline in CVSI stock. That being said, it is important to point out that the company did deliver an impressive performance in the second quarter.
The company reported gross profits of $22.5 million during the first six months of the year, and although this is just 33% of the gross profits of industry leader Charlotte's Web Holdings (TSX:CWEB) (OTCQX:CWBHF), analysts believe that CV Sciences could well be the better stock pick.
Hence, it is worthwhile to compare the two companies a bit. First of all, investors need to keep in mind that during the first six months of the year, CV Sciences has managed to generate free cash flow to the tune of $3 million. By contrast, Charlotte’s Web Holdings reported a negative cash flow of $19.3 million.
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CVSI stock is up 3% at $3.53 in early session on Wednesday. The stock has gained over 12% this week.
Although Charlotte’s Web’s operations are at a much larger scale, the advantages of free cash flow can never be ignored. In the latest quarter, Charlotte’s Web performed much better than CV Sciences, but the latter generated impressive numbers as well.
The total sales of CBD oil soared by as much as 36% in Q2 2019 year-on-year, and it was the latest in a total of 14 straight quarters in which CV Sciences recorded sequential growth in sales. It has also established a new facility that spans 45,000 square foot, and that will help the company in further expanding its operations.
CV's production capacity could increase by 500% in 2020 with the addition of the new facility. Considering the fact that the entire CBD market is primed for an explosion in the coming years, CV Sciences provides an opportunity for investors to watch.
Investors should, however, also keep in mind that CVSI stock has fallen over 45% from its January peak price.
Featured image: Canva
