Valens Stock Sinks Despite Posting Record Quarterly Earnings

Valens stock

Valens stock is in the red today despite The Valens Company (TSXV:VLNS) (OTCQX:VLNCF) posting record quarterly earnings for the three months ended November 30, 2019.

Record Earnings but Valens Stock Still Sinking

The Kelowna-based extraction firm reported an 86% increase in revenue to C$30.6 million for the fourth quarter and C$58.1 million for the fiscal year. The company has also managed to boost its revenue per gram of input to $1.25, more than double the previous quarter's figure of $0.61. Gross profit also increased from C$12.8 million in Q3 to C$22.6 million, while adjusted EBITDA came in at C$17.7 million, compared with C$9.8 million in the previous quarter. Despite the strong quarterly showing, Valens stock is down over 7% today.

Tyler Robson, CEO of The Valens Company, said the robust quarter was driven by strong demand for white label cannabis 2.0 products, a segment in which the company has established itself as a market leader in Canada. "These white label product development initiatives contributed to record revenues in the fourth quarter of 2019 as new and existing customers pushed to roll out Cannabis 2.0 oil-based products into the market. Our margins in the fourth quarter also remained strong and were only slightly lower than our Q3 results." Valens stock is currently trading for $3.67.

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Operational Highlights

The Valens Company also had a strong quarter in terms of operational highlights. In the fourth quarter, the company signed an agreement to become the first third-party processor to supply cannabis oil products to Medical Cannabis by Shoppers, the online medical cannabis e-commerce site of Shoppers Drug Mart. Valens also penned deals with BRNT Ltd to launch a line of unique cannabis vape pens, and Iconic Brewing to manufacture 2.5 million cannabis beverages over the term of the 5-year agreement.

Although Valens stock may be sinking today, it has actually been one of the best performing pot stocks on the Canadian market in recent months, gaining over 35% since its last earnings call. Today's losses are likely a result of the Coronavirus dragging down equity markets around the world, and Valens still looks like a strong performer as the cannabis 2.0 market continues to grow.

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