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article on valens by simply wall st

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The Valens Company Inc. (TSE:VLNS): When Will It Breakeven?

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Tue, December 7, 2021, 9:01 AM
 
 
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We feel now is a pretty good time to analyse The Valens Company Inc.'s (TSE:VLNS) business as it appears the company may be on the cusp of a considerable accomplishment. The Valens Company Inc. operates as a cannabis consumer products company. The company’s loss has recently broadened since it announced a CA$21m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$44m, moving it further away from breakeven. The most pressing concern for investors is Valens' path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Valens

According to the 8 industry analysts covering Valens, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of CA$2.6m in 2023. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 74% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

 
earnings-per-share-growth

We're not going to go through company-specific developments for Valens given that this is a high-level summary, however, keep in mind that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 3.8% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Valens, so if you are interested in understanding the company at a deeper level, take a look at Valens' company page on Simply Wall St. We've also compiled a list of important factors you should further research:

  1. Valuation: What is Valens worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Valens is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Valens’s board and the CEO’s background.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.


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D. H. Taylor
(@dhtaylor)
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Joined: 2 years ago
Posts: 940
 

@cannabis-investing I think the key with Valens is that they get consumed by Sundial.  Sundial’s numbers were once again, terrible.  But, you start putting these pieces of the puzzle together and you have something interesting, and that is when Valens gets interesting.  This will take time.  


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