Investing during an unpredictable market can be tricky. If you are like me, you have had difficulty trying to figure out where stocks are headed.
You might even be wondering…
Will interest rates crash the market? Are we headed for a recession? Or, is the worst behind us?
The frustrating thing is that nobody really knows the answer. So, what should you do during a challenging market?
Well, one thing is for certain when investing in stocks, a business that grows organically is one that is improving its value over time. No matter how the stock price behaves in the near future, over the long run, that business will be worth more in the coming years, than it was today.
In other words, it should bring you confidence when a business acquires more customers, sales, profits, and cash, than a year ago because it shows that the market believes it to be valuable. And if the stock happens to be trading at a discount, why not scoop up more shares for less, increasing your stake in a promising investment opportunity?
To illustrate this, we will explore one such company, possessing these qualities, in today’s market. Get ready to discover a cannabis company, unlike anything you have seen before.
Adastra Holdings, The Uncommon Cannabis Company
Adastra Holdings (Canada: XTRX), the Canadian cannabis company located in British Columbia is no stranger to progress. Over the past few quarters, the business has been compounding its sales at an unprecedented rate, north of 200% YoY.
But before we dive into the numbers, let’s discuss how they got there.
For Adastra, cannabis is more than just a product. The Company prides itself on creating masterfully crafted cannabis extracts that are bursting with potency and flavor. This focus on quality is what propelled it to the top of the Canadian cannabis market in such a short period of time.
Today, its Endgame concentrates rank 1st, 3rd, 4th, & 5th in Alberta; 2nd & 3rd in British Columbia; and its vapor pens rank 3rd in Ontario.
To create such high-quality cannabis extracts, Adastra strategically built a 13,500-square-foot extraction facility in Langley, BC. This world-class facility is home to cutting-edge technology that enables it to produce extracts at scale, invent new products through R&D activities, and ensure that all of its products adhere to strict Health Canada guidelines.
Now, the Company stocks its Endgame Extracts and 100%-owned Phyto Extractions products in more the 1,600 retailers across Canada, while bringing 26 new SKUs to market in Q2 2023 alone (Ontario – 9; Alberta – 15; and Newfoundland – 2).
In all, you’d be hard-pressed to find a company as determined as Adastra to lead the Canadian cannabis market in both quality and sales.
But What About its Management Team?
Adastra Holdings is led by a dynamic group of industry experts including the likes of CEO Michael Forbes.
Michael is a serial entrepreneur who has developed many successful ventures including 3 methadone clinics, 5 cannabis medical clinics, a chain of pharmacies, the Sitka Legends cannabis production facility, multiple cannabis retail stores, and a diverse group of businesses and real estate, among others.
What’s more, Forbes was a recipient of the prestigious Quantum Shift fellowship award, which is awarded each year to 40 of Canada’s most promising entrepreneurs, and backed by KPMG, the Ivey Institute of Entrepreneurship, TD Commercial Bank, and the Globe and Mail.
This broad experience has taught him many important lessons including what it takes to develop a leading business in one of Canada’s most competitive markets. As such, Michael is determined to refine and execute Adastra’s business strategy, ensuring that he and the Company maximize shareholder value over the long run.
So far, it appears that his vision for Adastra is turning out better than expected.
The High-Growth Q2 2023 That Was…
2023 is shaping up to be a record-breaking year for Adastra.
In the first half, the Company achieved a staggering 248% jump in revenue from a year ago, equating to more than $20.4 million in sales compared to just $5.9 million in the first half of 2022. This meteoric rise can largely be attributed to the Langley facility’s enhanced throughput, showcasing Adastra’s ability to scale operations effectively. What’s more, the Company grew revenue by 15% quarter over quarter underscoring its commitment to sustainable success.
As for profitability, Adastra’s gross profit hit $2.6 million in Q2 representing a remarkable 135% surge from Q2 2022. The Company also reduced its operating expenses from 42% of revenue in Q2 2022 to a lean 21% in Q2 2023. To do so, Adastra optimized its production economies of scale and astutely managed input costs.
One important thing to note is that Adastra’s operating expenses increased by 57% from Q2 2022 to Q2 2023. However, this expansion was a conscious decision to fuel growth as Adastra’s investments were directed towards building brand awareness, expanding reach through provincial distributors, and hosting impactful events. These efforts are projected to yield substantial returns in terms of future sales growth. And just to be safe, the Company has built up a robust cash position of more than $2 million that will help it endure any economic storm headed its way.
Looking ahead, Adastra’s forward-focused approach helps position them as leaders in the Canadian cannabis market. With a strong performance from its in-house brands and the acceptance of new SKUs across key provinces, the Company is set for continued dominance in the industry. Overall, one should expect that it will continue to deliver on its mission of providing shareholder value through the creation of masterfully crafted cannabis extracts.
The Bottom Line
It can be challenging to find quality companies during a difficult market. Moreover, how do you know when a business is worth the investment?
Well, one of the most effective ways to evaluate a company is to analyze its financial performance and ability to execute pre-determined goals. As you can see with Adastra, not only are they growing at an unprecedented rate, but they are also performing well above expectations and their peers.
When you compare them to companies like Avant Brands (Canada: AVNT.TO), which has significantly more debt, produced less revenue, and trades at a market cap more than 3 times the size of Adastra’s, it makes you wonder why the market is overlooking such a tremendous opportunity.
But fortunately, that does not have to be you.
So, if you are searching for a fast-growing company trading at a significant discount relative to its peers, consider checking out Adastra Holdings (Canada: XTRX) and its market-dominating business.
With the Canadian cannabis industry expected to grow 15.40% annually in the coming years, there may be no better opportunity out there than this one.
To learn more about Adastra Holdings, read its investor presentation here.
We are not brokers, investment, or financial advisers; you should not rely on the information herein as investment advice. If you are seeking personalized investment advice, please contact a qualified and registered broker, investment adviser, or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Edge Investments and its owners are compensated by Adastra Holdings for content creation. Edge Investments and its owners reserve the right to buy and sell shares in Adastra Holdings without further notice, which may impact the share price. Before investing, please do your research, including reading the companies’ public filings, press releases, and risk disclosures. The company provided information in this profile, extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your own research.
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