Yesterday saw The Supreme Cannabis Company (TSX:FIRE) (OTCQX:SPRWF) stock spike. On both exchanges, FIRE stock and SPRWF stock are on a high (ready to continue the trend today perhaps?).
Let’s check out what’s causing investors to react here.
SPRWF stock is currently selling for $1.59 USD, up over 6% on the day. One major impetus for the recent gains is the company’s recent report showing “triple-digit revenue growth.”
According to the press release, the details are as follows:
“Supreme Cannabis Company is seeing its initiatives bear fruit in increased revenues. For Q2 2019, the company’s revenue was $7.72 million, a 359% increase over revenue of $1.68 million in Q2 2018. Furthermore, that figure represents a 50% increase from Q1 2019 revenues of $5.14 million.”
Big returns are also bolstered by impressive partnerships. It helps SPRWF stock that the company is in bed with some of the biggest names in the cannabis industry. It has supply and distribution deals with Tilray (NASDAQ:TLRY), Aurora (NYSE:ACB) and Emerald Health Botanicals (OTCQX:EMHTF), to name only a few.
In particular, Supreme’s lucrative one-year $12 million CAD supply deal with Tilray supporting medical cannabis patients might be very appealing to investors.
At the end of January this year, Supreme released news about its production capacity. The company expects to have a total capacity of 50,000 kg of cannabis annually. But while others are still only growing or building facilities, according to Seeking Alpha, Supreme already has “finished goods [that are] worth 2.3 million CAD.”
What this means for investors is that SPRWF stock should return on increased revenues in the not-too-distant future, as the company has dried cannabis ready and waiting to be sold.
SPRWF stock trades on the OTCQX in America. A negative of this is that the stock is not exposed to as high a liquidity as it could be. This keeps stock value lower.
“The company should not be trading at 14x forward sales. Other competitors with less revenue growth are trading at 8x-49x sales.”
It also means that the company may appear to be in the early stages of business, when in reality it very much is not.
Here is a classic case of a cannabis company that is showing undervalued potential. If it were trading on a larger exchange, say the NASDAQ, then SPRWF stock could very easily be worth a lot more.
But that’s the question for investors now. When will this stock make that leap? Is it worth keeping an eye on, based on performance indicators?
What are your thoughts?
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