C21 Investments CXXIF stock is one of my top picks. To start, C21 Investments is already net earnings profitable. They have solid gross margins and excellent operating efficiencies. However, CXXIF stock is significantly undervalued when you compare the valuation of this stock versus valuations given to the broader stock market. Given that, if you look at the metrics on this stock, you will see that there is a lot of upside potential with CXXIF stock.
However, C21 Investments has one issue in that they have not been able to grow revenue. In part, this is due to COVID lockdowns in the State of Nevada. With a business plan that wanted to target tourists to Las Vegas and other areas in Nevada, not being able to hit these targets due to low tourism has hampered revenue growth. But, despite the lack of revenue growth, C21 Investments has been able to achieve net earnings profitability. This is important to me because I see this as a company that can achieve profitability without the urgency of economies of scale as most other cannabis companies.
From this, should C21 Investments see significant increases in revenues, marginal profits will be outsized and will aggressively add to the bottom line.
C21 Investments Company Comparison
Here are the numbers for comparing the cannabis companies on my Complete List of Top 100 Cannabis companies:
- #36 Market Cap: $64M
- #58 Revenue Growth Rate: -2.2%
- #21 Gross Margins: 51.1%
- #5 Operating Efficiencies: 26.7%
- #9 EBITDA/Revenue: 28.9%
- #50 Cash/Debt Ratio: 12.7%
- #47 Total Assets: $33.5M
Overall, there are two standouts for C21: operating efficiencies & EBITDA. But, there was also a drop in revenue QoQ affecting gross margins. Should there be a move higher in revenues there will be a return to higher gross margins.
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C21 Investments Latest Financial Release
Here is a breakdown of C21 Investments Q3 financial data from C21 Investments.
C21 Investments Gross Profits
Gross profits took a knock coming down from $9M to $8.2M. C21 has not been able to clear last year’s all-time high of $9.5M. The current revenue level is 13% below this number. Most cannabis companies when they get moving upwards significantly, they see some 25% increase in revenue QoQ. So, I feel as if C21 will fall into step at some point. But, along with the drop in revenue, gross margins have not been able to really advance, either. But, if revenues do increase, gross margins are sure to move higher.
C21 Investments Operating Profits
Operating costs are very low on a relative basis. The very best companies typically fall between 30% – 35% with operating costs v revenue. Numbers below these ranges demonstrate frugalness on the corporate side.
Still, C21 will want to start getting a bit more serious with sales and that may translate into higher costs for SG&A. This usually translates into higher sales, so there is a wash there. For now, operating expenses remain flatline around $2.3M. Look for any increases here with sales cost increases to translate into higher revenues.
C21 Investments EBTIDA & Net Profits
EBITDA & Net earnings profitability is one of the main reasons I like C21 Investments as much as I do. To me, this is a company that is being overlooked. This is why when you look at the DCF calculations below, stripping away the name, product, and everything else, you see a company with a stock that could very easily move significantly higher.
C21 Investments Cash On Hand
Cash is another area where I see a small concern; they are low on cash. But, while C21 Investments may be low on cash, they are net earnings positive which translates to cash flowing inward. I would like to see C21 Investments be better capitalized versus debt to give them the ability to grow much faster.
C21 Investments Total Equity
Total equity is key to creating shareholder value. I always look towards this to see what a company is doing to increase value. Equity is what drives the ability to create more and more revenue and profits. C21 Investments is driving up equity which, again confirms my thinking with the company that they will grow – despite revenues being flatline at this point.
As total equity continues higher and higher, look for revenues to start doing the same.
C21 Investments CXXIF Stock Forecast
Below is the methodology for my discovering my price target for CXXIF stock.
| Assumptions | ||
|---|---|---|
| Tax Rate | 25% | |
| Discount Rate | 8.000% | |
| Perpetural Growth Rate | 25.0% | |
| EV/EBITDA Mulltiple | 50.0x | |
| Transaction Date | December 31, 2021 | |
| Fiscal Year End | 12/31/21 | |
| Current Price | $0.503 | |
| Shares Outstanding | 120,641,000 | |
| Debt | $28,000,000 | |
| Cash | $3,000,000 |
| Market Value | ||
|---|---|---|
| Market Cap | $60,682,423 | |
| Plus: Debt | $28,000,000 | |
| Less: Cash | $3,000,000 | |
| Enterprise Value | $85,682,423 | |
| Equity Value/Share | $0.5030 |
| Discounted Cash Flow | Entry | 2022 | 2023 | 2024 | 2025 | 2026 | Exit | |
|---|---|---|---|---|---|---|---|---|
| Date | December 31, 2021 | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2024 | Dec 31, 2025 | Dec 31, 2026 | Dec 31, 2026 | |
| Time Periods | 1 | 2 | 3 | 4 | 5 | |||
| Year Fraction | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||
| EBIT | $15,750,000 | $20,625,000 | $30,000,000 | $42,500,000 | $56,250,000 | |||
| Less: Cash Taxes | $3,937,500 | $5,156,250 | $7,500,000 | $10,625,000 | $14,062,500 | |||
| Plus: D&A | $2,000,000 | $2,500,000 | $3,000,000 | $4,000,000 | $5,000,000 | |||
| Less: Capex | $1,500,000 | $2,000,000 | $2,500,000 | $3,000,000 | $3,500,000 | |||
| Less: Changes in NWC | -$2,500,000 | -$3,000,000 | -$4,000,000 | -$5,000,000 | -$7,500,000 | |||
| Unlevered FCF | 1 | $14,812,500 | $18,968,750 | $27,000,000 | $37,875,000 | $51,187,500 | ||
| (Entry)/Exit | -$114,274,340 | $1,343,060,662 | ||||||
| Transaction CF | - 0 | $14,812,500 | $18,968,750 | $27,000,000 | $37,875,000 | $51,187,500 | $1,343,060,662 | |
| Transaction CF | -$114,274,339 | $14,812,500 | $18,968,750 | $27,000,000 | $37,875,000 | $51,187,500 | $1,343,060,662 |
| Rate of Return | |
|---|---|
| Target Price Upside | 3,193% |
| Internal Rate of Return (IRR) | 111% |
| Market Value vs Intrinsic Value | |
| Market Value | $0.25 |
| Upside | $7.98 |
| Intrinsic Value | $8.232 |
While I have known that CXXIF stock was undervalued cannabis stock, I was not sure that it was undervalued as much as it was until I ran CXXIF stock through a discounted cash flow calculator. My original projection was for ~$4.00 – $5.00. Now, I am revising upwards my projection for CXXIF stock based on this calculation.
I kept modest revenue increases for C21 Investments in the beginning years of this. For now, C21 has not seen much in the way of increasing revenue gains. But, I expect that to change as time goes forward and the pandemic recedes.
I am not entirely certain on the CapEx numbers I have in here. But, I do not see this as a bad thing. I have increased CapEx expenditures more than normal on a comparative basis. Given this, there should also be in-kind revenue gains from these capital expenditures.
Is C21 Investments CXXIF Stock A Good Investment?
First, C21 Investments is net earnings profitable. Period. And, given the current price, the future revenue potential, and unlevered cash flow, CXXIF stock is significantly below where it should be when you compare it to the broader market. Plus, did I mention C21 is net earnings profitable?
As soon as cannabis stocks get to the point where they start to move higher, CXXIF stock will make significant moves higher.
C21 Investments Financial Data
C21 Investments CXXIF Stock Financial Statements
| July 2018 | October 2018 | January 2019 | April 2019 | July 2019 | October 2019 | January 2020 | April 2020 | July 2020 | October 2020 | January 2021 | April 2021 | July 2021 | October 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $0.1 | $0.3 | $2.2 | $7.8 | $9.9 | $10.6 | $9.5 | $8.1 | $9.4 | $9.5 | $9.1 | $9.2 | $9.0 | $8.2 | |
| $0.0 | $0.5 | $1.9 | $4.9 | $6.8 | $6.3 | $6.3 | $4.9 | $5.4 | $3.6 | $5.0 | $4.3 | $4.4 | $3.8 | |
| $0.1 | -$0.2 | $0.3 | $2.9 | $3.1 | $4.3 | $3.2 | $3.2 | $4.0 | $5.9 | $4.1 | $4.9 | $4.6 | $4.4 | |
| 100.0% | -66.7% | 13.6% | 37.2% | 31.3% | 40.6% | 33.7% | 39.5% | 42.6% | 62.1% | 45.1% | 53.3% | 51.1% | 53.7% |
| July 2018 | October 2018 | January 2019 | April 2019 | July 2019 | October 2019 | January 2020 | April 2020 | July 2020 | October 2020 | January 2021 | April 2021 | July 2021 | October 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | $0.1 | $0.3 | $2.2 | $7.8 | $9.9 | $10.6 | $9.5 | $8.1 | $9.4 | $9.5 | $9.1 | $9.2 | $9.0 | $8.2 | |
| Total Operating Expenses | $7.3 | $3.3 | $0.7 | $4.1 | $4.3 | $3.3 | $2.8 | $2.4 | $2.3 | $2.6 | $2.5 | $2.4 | $2.4 | $2.2 | |
| Operating Income | -$7.2 | -$3.5 | -$0.4 | -$1.2 | -$1.2 | $1.0 | $0.4 | $0.8 | $1.7 | $3.3 | $1.6 | $2.5 | $2.2 | $2.2 | |
| Operating Efficiency | 7300.0% | 1100.0% | 31.8% | 52.6% | 43.4% | 31.1% | 29.5% | 29.6% | 24.5% | 27.4% | 27.5% | 26.1% | 26.7% | 26.8% |
| July 2018 | October 2018 | January 2019 | April 2019 | July 2019 | October 2019 | January 2020 | April 2020 | July 2020 | October 2020 | January 2021 | April 2021 | July 2021 | October 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Interest Expense | -$0.2 | $0.0 | -$0.7 | -$1.1 | -$1.0 | -$0.9 | -$1.3 | -$0.9 | -$0.7 | -$0.9 | -$2.0 | -$0.5 | -$0.4 | -$0.4 | |
| Other Non-Operating Income | $0.0 | -$0.1 | -$3.0 | -$0.3 | $0.4 | -$0.1 | $5.4 | $0.3 | $0.0 | $0.2 | -$6.0 | $2.8 | $2.7 | $2.4 | |
| EBT Inc. Unusual Items | -$7.6 | -$3.6 | -$4.1 | -$2.6 | -$2.0 | $0.0 | $4.5 | $0.3 | $1.0 | $2.6 | -$6.3 | $4.8 | $4.5 | $4.2 | |
| EBT Excl. Unusual Items | -$7.6 | -$3.6 | -$11.5 | -$2.7 | -$2.2 | -$4.2 | -$19.7 | -$1.2 | $1.0 | $2.1 | -$5.7 | $5.2 | $4.5 | $4.0 | |
| Tax | $0.0 | $0.0 | $0.0 | $0.4 | $0.8 | $1.0 | $1.6 | $0.6 | $1.0 | -$0.2 | $0.9 | $0.8 | $0.8 | $0.6 | |
| Earnings From Cont. Ops. | -$7.6 | -$3.6 | -$11.5 | -$3.1 | -$3.0 | -$5.2 | -$21.3 | -$1.8 | $0.0 | $2.3 | -$6.6 | $4.4 | $3.7 | $3.3 |
| July 2018 | October 2018 | January 2019 | April 2019 | July 2019 | October 2019 | January 2020 | April 2020 | July 2020 | October 2020 | January 2021 | April 2021 | July 2021 | October 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Income | -$7.6 | -$3.6 | -$11.5 | -$3.1 | -$3.0 | -$5.2 | -$21.3 | -$1.8 | $0.0 | $2.3 | -$6.6 | $4.4 | $3.7 | $3.3 | |
| Diluted EPS | -$0.18 | -$0.15 | -$0.22 | -$0.05 | -$0.04 | -$0.06 | -$0.25 | -$0.02 | $0.00 | $0.02 | -$0.05 | $0.04 | $0.03 | $0.03 | |
| Dividend Per Share | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| EBITDA | -$7.3 | -$3.3 | $0.0 | -$0.5 | -$0.2 | $1.8 | $1.0 | $1.3 | $2.3 | $3.5 | $3.8 | $2.8 | $2.6 | $2.6 | |
| EBITDA/Revenue | -7300.0% | -1100.0% | 0.0% | -6.4% | -2.0% | 17.0% | 10.5% | 16.0% | 24.5% | 36.8% | 41.8% | 30.4% | 28.9% | 31.7% |
| April 2020 | July 2020 | October 2020 | January 2021 | April 2021 | July 2021 | October 2021 | ||
|---|---|---|---|---|---|---|---|---|
| Cash On Hand | $1.3 | $2.7 | $3.4 | $6.2 | $6.1 | $4.2 | $3.3 | |
| Free Cash Flow | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| Total Assets | $59.9 | $60.5 | $60.0 | $68.8 | $67.9 | $66.5 | $65.8 | |
| Total Liabilities | $45.3 | $45.5 | $42.6 | $43.5 | $37.8 | $33.0 | $28.8 | |
| Total Equity | $14.6 | $14.9 | $17.4 | $25.3 | $30.1 | $33.5 | $37.0 | |
| Cash Debt Ratio | 2.9% | 5.9% | 8.0% | 14.3% | 16.1% | 12.7% | 11.5% | |
| Book Value Per Share | $0.15 | $0.15 | $0.18 | $0.22 | $0.26 | $0.28 | $0.31 |
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