To paraphrase what the fellow said, “No matter what your goals are, if you aren’t a health care professional you can’t afford to lose any more time than you already have. The distractions of life are just too much, and the cost of the time wasted is a very real drain on your finances.”

There is a new wave of marijuana stocks gaining popularity in the U.S., but most of them can be bought for a pittance. The latest stocks going viral are two little-known companies that have received investment from the likes of Larry Ellison, the founder of Oracle, and John Paulson, the hedge-fund manager who made a fortune betting on the housing market.

George Leong, BA. Published on 11. May 2021 word-image-9129

Vireo Stock a small pot game with big ambitions

Optimism about the U.S. cannabis industry is increasing as more states legalize medical and recreational marijuana. Vireo Health International Inc. (CNSX:VREO, OTCMKTS:VREOF) is a high-risk, micro-cap company in the U.S. herbal and recreational market that offers a strong risk/reward outlook. Vireo is still in the early stages of its development, but it is showing significant revenue growth, which should continue. The company is involved in everything from research and development to cultivation, distribution and retail. Vireo Health International Inc has offices in Arizona, Maryland, Minnesota, New Mexico and New York. And it’s getting bigger and bigger.

Low VREOF price creates an opportunity

The chart below shows the surprising movement of Vireo shares over the past year, after they fell to $0.20 during the March 2020 crisis. The upward trend of the VREOF share is impressive. The share easily reached pre-COVID-19 levels, rising 382% last year and 55% this year. word-image-3754 Graph courtesy of StockCharts.com Over the past three months, Vireo shares have fallen 35% to a level where I see an aggressive opportunity.

Vireo Health International Inc increases turnover

Although Vireo Health International Inc. is still in its infancy, sales have already increased in the first two years. In 2020, Vireo’s revenue increased 64.3% year-on-year to $49.2 million. (Source: Vireo Health International, Inc. (VREOF), Yahoo!Finance, last visited May 10, 2021). The company’s revenue is likely to increase as new cannabis stores open and third-party sales increase. Revenue is expected to increase 47.5% to $72.6 million in 2021. As Vireo’s revenues increase, it is not surprising that the company regularly records a loss in earnings per share (EPS), which is calculated in accordance with generally accepted accounting principles (GAAP).

Fiscal year GAAP diluted earnings per share Growth
2017 -$0.01 N/A
2018 -$0.02 -52.0%
2019 -$0.94 -6,108%
2020 -$0.32 66.6%

(Source: Vireo Health International Inc. MarketWatch, last accessed May 10, 2021). The company also reported negative earnings before interest, taxes, depreciation and amortization (EBITDA). What you want to see is a reduction in losses and a path to profitability. Based on consensus forecasts, Vireo will reduce its adjusted loss in 2021 to $0.06 per diluted share. The company could break even by 2022. (Source: Yahoo! Finance, op. cit.) Meanwhile, Vireo Health International Inc. needs capital to expand its growth capacity and retail distribution. At the end of 2020, the company’s working capital was at a high level. Vireo had $25.5 million in cash and $23.2 million in debt. (Source: Yahoo! Finance, op. cit.)

Analyst

Vireo Health International Inc. is just beginning to ramp up its sales and expand its retail network. The major risk to the company will be competition and its ability to control its share of costs. Of course, if the U.S. marijuana market is growing for a small company like Vireo, the profits can be huge.

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