The Canadian cannabis stocks we’ve identified expect to profit by entering the cosmetics field early
SmallCapPower | May 6, 2019: With the growing legalization trend of cannabis products, there are many niche markets within the industry that have significant market opportunity. The sector’s next frontier seems to be CBD-infused beauty products. These products help treat inflammation, aging and common skin disorders. We highlight that Jefferies Financial Group has found there has been a 370% increase in the search for the key words “CBD beauty” and predict the industry could be worth $25 billion within the next 10 years. When comparing this to the skincare industry, according to Jefferies, CBD-infused products are expected to gain a 15% market share of the US$167B skincare industry. That being said, the Canadian cannabis stocks on our list seem to have the best CBD beauty products upside. For reference, the average consensus 2020E revenue multiple is 7.9x.
*Share prices as at close May 2, 2019, data obtained from S&P Capital IQ
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Ovation Science Inc. (CSE:OVAT) – $0.55
Cannabis
Ovation Science has exclusive rights to sublicense Invisicare®, which is a patented drug delivery technology that is used in cannabis products and hemp seed oil to create topical skincare products. The formula used in Invisicare® helps resist rub-off without reducing the benefits of the cream. Ovation Science announced on April 30, 2019, that it has had successful testing results from its broad-spectrum CBD sunscreen, which will be sold under their ARLO Beauty brand. The ARLO beauty brand was recently launched on April 16, 2019 and focuses on providing a topical skincare line that is infused with hemp-derived cannabidiol.
- Market Cap: $13.2 Million
- 2020 Revenue Estimate Multiple: 1.6x
- YTD Return: +83.3%
- 30 Day Average Trading Volume:102,000
- 90 Day Average Trading Volume: 51,000
Green Growth Brands Inc. (CSE:GGB) – $4.91
Cannabis
The Company runs a vertically-integrated cannabis facility that is located in Las Vegas, Nevada. Green Growth distributes products through mall-based shops, partnerships with traditional retailers and e-commerce platforms. Currently, the Company has had successful retail strategies with large specialty retail companies such as Bath & Body Works, Designers Shoe Warehouse and L Brands. These partnerships will be used in the creation of products for the Company’s Seventh Sense branded retail stores. These opened on March 18, 2019 and focus on CBD-infused beauty and health products. Since December 31, 2018, GGB’s stock price has increased 44%. Of note, Green Growth expressed interest in January 2019 to acquire Aphria Inc in order to operate in both Canada and the U.S.
- Market Cap: $930.1 Million
- 2020 Revenue Estimate Multiple: 3.7x
- YTD Return: -12.2%
- 30 Day Average Trading Volume: 373,000
- 90 Day Average Trading Volume: 385,000
Yield Growth Corp. (CSE:BOSS) – $0.61
Cannabis
The Company is a vertically-integrated asset company that offers cannabis-infused products. Yield Growth sources revenue from licensing, incubation services and product sales. The Company’s subsidiary, Urban Juve, is a skin and personal care line that uses hemp as the main ingredient. Currently the 11 products offered are available for purchase in Canada and the U.S. and the Company is expected to expand into Asia this spring. On April 30, 2019, Urban Juve announced a consumer marketing and sales alliance with Ipsy. Ipsy is an online store that also offers a subscription for beauty products to be sent monthly to the purchaser. The alliance is expected to allow Urban Juve’s products to be bought on Ipsy’s ecommerce marketplace and sent to targeted customers. Additionally, on April 16, 2019, the Company filed a PCT patent for a method of cannabis root extraction and manufacturing, as well as the use of the oil as an active ingredient in therapeutics and cosmetic products.
- Market Cap: $48.4 Million
- 2020 Revenue Estimate Multiple: n/a
- YTD Return: +79.4%
- 30 Day Average Trading Volume: 513,000
- 90 Day Average Trading Volume: 679,000
Khiron Life Sciences Corp. (TSXV:KHRN) – $3.35
Cannabis
Khiron is a vertically-integrated Canadian cannabis company that has operations in Latin America. The Company focuses on both scientific and medical-based research for cannabis-based products. The launch of the Company’s CBD skin and body care cosmetic brand Kuida was announced on July 18, 2018. More recently, on March 19, 2019, the brand entered the European market as it was introduced in an international beauty fair called Cosmoprof Worldwide Bologna. On April 10, 2019, Khiron announced a partnership with Colombian research hospital, Centro Dermatológico Federico Lleras Acosta, to grow product development in the skincare market.
- Market Cap: $340.7 Million
- 2020 Revenue Estimate: 4.0x
- YTD Return: +117.8%
- 30 Day Average Trading Volume: 1,321,000
- 90 Day Average Trading Volume: 1,695,000
Ubika Research/SmallCapPower has received compensation from Ovation Science Inc. to provide analyst research coverage. For full disclosure please visit here >>
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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