Shares of Organigram Holdings Inc. (TSXV: OGI) have fallen more than 10% to its current price of $2.24 since the Company released its third-quarter results
SmallCapPower | August 4, 2017: Organigram Holdings Inc. (TSXV: OGI) reported financial results recently for the quarter ending May 31, 2017. Revenues increased just 6% to reach $1.9 million from $1.8 million in prior year quarter. This growth rate substantially lags its peers, which are showing double-digit growth. The dried marijuana sales stood at 196,217 grams (down 8% YoY), which is clearly a negative indicator for Organigram, which wants to cash in on the heavy demand when recreational marijuana becomes legalized in Canada in 2018. On the positive side, Organigram reported a 25% (QoQ basis) net increase in registered patients in the quarter.
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Shares of Organigram have fallen more than 10% to its current price of $2.24 since the Company released its third-quarter results on July 28, 2017.
Organigram Holdings’ financial results for the quarter completed May 31, 2017, included expenses associated with the implementation of an industry-leading quality assurance program (QA Program). Due to the implementation of the enhanced QA Program, which resulted in fewer products being introduced to the market than originally contemplated, Organigram recognized indirect production expenses of $1.1 million related to inventory destruction, and a loss of $1.6 million due to fair value adjustment to biological assets and net realizable reduction to inventory. As a result, Organigram generated adjusted EBITDA of ($1.5) million and cash flow of ($1.1) million.
The current results looks negative on the fundamental level, with lot of concern over the volumes of marijuana sold. Organigram is clearly falling behind as other marijuana companies are trying to capture the budding recreational marijuana market in Canada.
In terms of valuation, Organigram currently trades at price to sales value of 50.61x, price to book value of 2.86x and forward PE of 33.43x.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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