Charlotte’s Web: Cannabis Stock With Positive CFO And Net Income
Reporting sales of $48 million in the nine months ended September 30, 2018, 75% more than that in the same time period in 2017, Charlotte’s Web Holdings Inc. (OTCQX:CWBHF) should attract growth investors. But, that’s not the most appealing factor here. The most interesting feature is that the company is also reporting positive CFO and positive net income, which value investors should also review. On the top of it, CWBHF recently received a massive amount of cash and should build more fixed assets in the near future. The market should be expecting both revenue growth and asset growth in 2019 and 2020. While the company does not seem cheap at 15x sales, it should be followed closely. Keep in mind that revenues are expected to grow and could reduce the EV/Forward sales ratio. Only the investors reviewing each quarterly report in the future may be able to get paid on this name.
Incorporated in British Columbia and headquartered in Boulder, Colorado, CWBHF focuses on the production and distribution of whole-plant hemp extract cannabidiol wellness products. Investors can have a look at some of the company’s products in the image below. Please note that CWBHF does not produce or sell medicinal or recreational marijuana or products derived therefrom.
Source: Company’s Website
The company runs an integrated business model with non-GMO hemp genetics on 300 acres of family farms. This setup is is very beneficial. The fact that CWBHF can review the entire production process and is also selling products should be appreciated. As a result, the company is able to monitor quality. That’s not all. CWBHF’s products are also manufactured in a FDA-registered facility. Not many cannabis producers can say so.
With regards to production, investment analysts should be expecting an increase in the amount of harvested hemp as compared to 2017 and 2018. The previous production growth seems to justify this thesis. Read the following words from a press release that Charlotte’s Web distributed in January 2019:
“The company reported more than a 10 times growth in harvested hemp compared to its 2017 grow season. The high-quality 100% U.S.-grown hemp will be processed through proprietary extraction methods to create whole plant hemp extract that will be used in Charlotte’s Web products for sale in 2019 and 2020.” Source: Press Release
As of September 30, 2018, the amount of cash is substantial and has increased quite a bit since December 2017. The company reported $79 million in cash, 1,024% more than that in December 2017. The total amount of assets increased as well in the same time period, from $19.4 million to $110.38 million. With these numbers in mind, it seems very clear that investors are providing money to the company at a fast pace. The image below provides the list of assets:
As of September 30, 2018, inventories were worth $14.3 million with raw materials worth $6.6 million and finished goods worth $1.87 million. The amount of inventories increased by 199% as compared to that on December 31, 2017. This is beneficial. If the company is able to sell these inventories, revenue should increase. Only those who studied the increase in inventory may be able to expect the revenue increase. The image below provides further details on this matter:
The investors assessing the selling price of cannabis should appreciate the image below. The company expects to sell its inventory at an average of $13.47, which does not seem cheap. Other companies are selling their cannabis at a cheaper price.
The list of liabilities does not seem worrying at all. With current liabilities of $11.29 million and non-current liabilities of $14.21 million, CWBHF seems to have cash in hand to pay these liabilities. In addition, the financial debt seems very small. The company reports notes payable worth only $0.023 million. The image below provides further details on the list of liabilities:
Positive Net Income May Surprise Investors
Undoubtedly, the income statement is what investors should appreciate the most on this name. CWBHF reports both revenue growth and large gross profit margin. In the nine months ended September 30, 2018, the company reported $48 million, 75% more than in the same time period in 2017. In addition, with only $10.9 million in cost of sales, the gross profit before adjustments of fair value of biological assets equals $37 million. It is quite beneficial.
The bottom line is also ideal. With general and administrative expenses of $14 million and sales and marketing expenses of $8.3 million, the operating income is equal to $11.6 million. With that, the net income equals $8.6 million, which should surprise many cannabis investors. They are used to seeing cannabis companies that lose money. The image below provides further details on this matter:
Value investors should also appreciate the company as it reported $1.5 million and $4.8 million of cash flow in the nine months ended September 30, 2018 and nine months ended September 30, 2017 respectively. The image below provides further details on this matter:
The equity structure is not that ideal. The company exhibits low float, equal to 16.44 million shares, 17% of the total amount of shares outstanding. It means that the stock price may exhibit a large amount of volatility, which investors should keep in mind. It is a risk. Large sums of money could be made or lost in a very short period of time.
Taking into account the total amount of shares, the options, broker warrants and warrants outstanding, the amount of shares seems to be 106 million. The image below provides further details on this matter:
As of March 1, 2019, with 106 million shares at $14.49, the total market capitalization equals $1.535 billion. Adding debt of $0.023 million, the enterprise value equals $1.53502 billion.
In the nine months ended September 30, 2018, the company reported $48 million. With these figures in mind, assuming forward revenue of $100 million seems reasonable and the company trades at 15x forward sales.
As shown in the images below, CWBHF seems to be growing at a slower pace than competitors, but it reports a larger gross profit margin than some other peers:
With these numbers in mind, the company does not seem expensive, but it is not undervalued either. It could trade higher, but it does not represent a buying opportunity at 15x forward sales. If it goes below 10x and the gross profit margin continues to be good, investors may buy shares, but not at current prices. The image below provides further details on the valuation of other competitors:
Having said this about the valuation of the company’s growth, perhaps value investors may be more interested in CWBHF than growth investors. With positive CFO, growing revenues and cash in hand, the company may be seen as a hidden gem for such type of investors. Keep in mind that they should appreciate the future cash flows and the lack of financial debt quite a bit. Growth investors many times only look at revenue growth and gross profit margin.
With tons of cash, large revenue growth and a small amount of property, CWBHF seems to have a lot of potential. Investors recently provided a massive amount of cash, so the market should be expecting the company to build fixed assets and grow revenues in the future. Having mentioned this feature, the fact that the company reports positive CFO and positive net income is very beneficial. This fact should attract value investors.
With regards to valuation, CWBHF does not seem undervalued or overvalued. It trades at 15x forward sales with competitors trading at more than that. However, the revenue growth and the gross profit margin of CWBHF do not seem to justify higher valuations. The company seems a buy at below 10x, but not at the current price. Investors should follow the stock closely. Keep in mind that revenue growth may push the company’s EV/Sales ratio down in 2019.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
Charlotte’s Web Celebrates CBD Industry’s 1st Decade With its New “Charlotte Figi Family Grant Program”
DENVER , April 7, 2022 /PRNewswire/ – This week represents one decade since the seven Stanley brothers helped launch the CBD industry from Colorado . Per proclamation by Governor Jared Polis in 2020, following the unfortunate passing of Charlotte Figi , today is officially ‘Charlotte Figi Day’ in Colorado . Charlotte’s Web Inc., the market leader in CBD products, today unveils its “Charlotte Figi Family Grant Program” as an annual initiative to honor the historic legacy of Charlotte, the little girl who suffered from seizures due to Dravet Syndrome, and her story that helped to change CBD access for millions around the world.
Charlotte’s Web CBD celebrates Charlotte Figi Day on April 7 (CNW Group/Charlotte’s Web PR Marketing)
Ten family grants are being awarded in keeping with the ten-year anniversary of the Stanley brothers providing their (high-CBD and low-THC) full spectrum hemp formula to Charlotte Figi after her pediatrician supplied written permission. Each year on Charlotte Figi Day , the Company will now announce its family grantees and increase the number of grants by one annually. This year’s granted families were selected by the Colorado -based nonprofit Realm of Caring based on families with the greatest need. Each family will receive a year’s supply of Charlotte’s Web product to support each family’s overall health and wellness. This year’s ten family grantees herald from six states from California to Virginia .
“We keep Charlotte’s heroic story illuminated while also supporting wellness and relief for those families most in need,” said Charlotte’s Web CEO Jacques Tortoroli . “Our founders were there at the beginning in 2012 with Charlotte and her family. Charlotte’s story stands for the true founding of not only our company, but the entire hemp CBD industry. The Charlotte Figi Family Grant Program pays tribute to our namesake by giving to health-seeking families with qualified needs.”
Charlotte’s Web hosts an event for all of its employees today at 3:30 pm MST at its manufacturing plant and R & D facility — the LOFT — in Louisville to honor the legacy of Charlotte Figi and will present the inaugural ‘Courage Award’ to an employee who has demonstrated unbridled courage in their work and their life in this past year.
Since 2012 Colorado has been (and still is) the epicenter for the CBD movement that swiftly became an industry. In its first decade, the CBD industry grew from just one brand – Charlotte’s Web– to more than 3,500 CBD brands in 2020, according to The Brightfield Group. Colorado was the first state in which CBD product sales were legal and the state has remained at the forefront of hemp and cannabis innovation and growth. In a relatively short time span, the CBD sector has expanded and grown, according to the Brightfield Group research firm ( November 2021 ) that estimated the U.S. hemp-derived CBD market at $4.7 billion in retail sales in 2021 and forecasted revenues to reach $12 billion by 2026, driven by accelerated growth of ingestible products.
This profound growth first began as a result of the courage of Charlotte Figi , her family, and the entrepreneurial passion of the Stanley Brothers. Charlotte’s experience became a shared experience by tens of thousands of families, many of whom migrated to Colorado . The activism of Charlotte’s Web and the nonprofit Realm of Caring helped to change laws in dozens of states and helped establish two meaningful national farm bills that changed access to hemp for all Americans.
The timeline below shows the significant milestones that have led up to Colorado’s official “Charlotte Figi Day”:
Feb. 2012 : Paige Figi , Charlotte’s mother, meets Joel Stanley in Colorado and Charlotte, with written permission from her pediatrician, and first uses the formula from the Stanley Brothers (now called Charlotte’s Web Original Formula).
July 2012 : Heather Jackson and her family are the third to meet the Stanley Brothers in Colorado to secure Original Formula for her son Zaki who also suffered from pediatric epilepsy.
Aug. 2013 : Dr. Sanjay Gupta’s CNN’s Weed 1 airs, telling the story of Charlotte Figi and the Stanley Brothers.
2013: Paige Figi and Heather Jackson founded nonprofit Realm of Caring to ensure all families had support in understanding hemp wellness.
March 2014 : CNN’s Weed 2 follows up, showing that there are so many other people similar to Charlotte.
Dec. 2014 : The waitlist for the Stanley’s formula spikes to 15,000 families seeking access to the Original Formula.
2012-2015: Charlotte’s Web founders and employees and Realm of Caring helped 500+ families move to Colorado to access CBD. (“We stopped counting at 500.” – Heather Jackson )