VFF stock is one to watch. The reason is simple: Village Farms International (TSX:VFF) (NASDAQ:VFF) is one of the best performers in the cannabis sector, with shares up more than 500% at one point in 2019. Even in the midst of a market-wide sell-off, VFF has resurged and still remains double its entry-value at the beginning of the year.
VFF Stock Growth
Yes, we are in the throes of a troubled market; the cannabis sector has suffered a shakeup due to the delay of phase two legalization in Canada, and prominent managerial and regulatory issues at one company in particular, which spawned a market-wide fear.
But Village Farms International remains, largely, unphased. This is a stock that experiences high volume, and at a current price of $14.97 USD, is opportunity knocking?
The company’s joint venture with Emerald Health Therapeutics (TSXV:EMH) (OTCQX:EMHTF), Pure Sunfarms, is causing all the hype. Why? Because it has finally reached full production rate and now the venture is converting a second greenhouse to bolster production numbers.
Further, this cannabis division is already paying off. Village Farms released its 2019 Q1 report in May showing revenue of $10.8 million and EBITDA of a positive $6.4 million. This is triple what it produced in the quarter prior and was in thanks to ramping up cannabis production at its facility.
Profitability also improved due to a “lean corporate structure and low overhead.”
Cannabis AND Produce
There is a significant consideration with VFF stock, however. Village Farms International also runs a produce business focusing on tomatoes, peppers, and cucumbers. Unfortunately, business in this sector has underperformed.
As according to SeekingAlpha:
“VFF reported a horrible quarter for its produce business. Sales increased 8% to $32 million but gross margin dropped to almost 0% from 12% in the same quarter last year […] It is needless to say that the company is struggling with its produce business which has not performed well in recent years.”
But it seems this hasn’t phased investors as all eyes are on the lucrative potential of the cannabis sector. At the end of the day, the company has already achieved profitability and has delivered “one of the best execution in terms of timing, costs, and production ramp-up.”
For this reason, the greater goal seems worth the losses incurred by its original produce business. What do you think about VFF stock? Is it on your radar?
Featured Image: Village Farms