Gaby GABLF stock is a California cannabis company to keep an eye on. New management was brought in a little while ago to encourage growth and consistency, and to create a path towards gaining a position in the fragmented California market. Gaby has recently closed on the acquisition of a dispensary solidifying themselves as a vertical player. Also, Gaby products can be found on the shelves of some 200 different dispensaries throughout California.
At the same time, Gaby hopes to bring its dispensary total up to 10 dispensaries in the coming 3-5 years. This will increase revenues along with the footprint. However, with the state at 39M residents, only 10 dispensaries seems a bit on the smallish side. As of right now, though, no one company appears to be coming out of California as a leader in size.
Financial metrics are improving for Gaby. But, that can be misleading if you simply look at the latest numbers. The acquisition of the Mankind dispensary added significant revenue as the San Diego dispensary, a popular and well-regarded dispensary, was the drive of the financials. Still, this is now a solid foundation to start from and much more is expected in the future.
The fact that California is so fragmented is something I have always been intrigued by. I expect that California will become a formidable battle ground for companies in what is by far the biggest single cannabis market potential in the United States. Because of this, movers with an eye towards solidifying themselves in a vertical position I expect to do well in the coming years.
Let’s look at some of Gaby’s numbers to see where they are and potentially where they could be.
The Gaby GABLF Stock Comparison
Gaby is still a somewhat smallish company when compared to many other cannabis companies:
- #69 Market Cap: $21M
- N/A Revenue Growth Rate
- #48 Gross Margins: 35.1%
- #12 Operating Efficiencies: 32.1%
- #29 EBITDA/Revenue: 0.8%
- #72 Cash/Debt Ratio: 7.2%
- #60 Total Assets $7.9M
There are a few solid numbers here, specifically the operating efficiencies numbers put them in an excellent position. I omitted revenue growth rate as a comparison because the inclusion of the dispensary is misleading to assume this was new growth. Still, the foundation will now serve to provide a solid springboard for Gaby.
The Gaby Stock Financial Data
As I mentioned, Gaby’s numbers are increasing since the merge of Mankind Dispensary out of San Diego. There are plans to grow to 10 dispensaries in the coming years consolidating California.
Revenue
The increased revenue is due to the merge of Mankind Dispensary:
Management has a goal of building Gaby Inc. up to 10 dispensaries which, in turn, will build up revenues. But, this will take time so revenue growth from more dispensaries will have to wait.
During that time, Gaby Inc products are in some 200 different dispensaries throughout the state. What I am wondering is what would it take to see noticeably organic growth in product sales throughout these dispensaries. Simultaneously, developing more dispensaries will continuously add to the footprint for Gaby Inc.
Gross margins
Gross margins saw noticeable increases but, these are far from where they need to be to be competitive versus many other players:
The best companies print roughly 60% – 65% in gross margins. Dispensaries tend to have even-leveled margins because a lot of costs can be fixed and are predictable. A dispensary knows how much labor will be needed on a Friday night versus a Monday morning. Because of being able to predetermine costs, it is a little easier for a dispensary to get to higher margins versus a grow facility that may have to burn off product due to lack of sales.
Still, there is room to go higher with gross margins as only one dispensary has yet to hit economies fo scale. Also, the combination of the grow and processing and building up of sales volume may push margins higher in the future.
Operating Efficiencies
Operating efficiencies are a true bright spot for Gaby Inc:
The very best companies print Gaby Inc has hit its stride on a relative basis for operating costs versus revenues. With increasing revenues, Gaby Inc would be able to add to their management team and more easily justify cost increases as this could also add to increased revenue gains.
EBITDA Profits
As for EBITDA profits, Gaby Inc is just hitting their stride thanks in large part to the dispensary inclusion of revenue while simultaneously low operating costs, EBTIDA is now positive:
The gross margins as low as they are could easily push EBTIDA upwards. If Gaby Inc were to hit 60% gross margins off of the $9M they just printed that would add $2.25M in EBITDA profits. That, of course, would trickle lower to net earnings, the ultimate goal.
Management is known for rolling out retail stores from their past. But, cost cutting is what needs to be the rule of the day. Still, hitting positive is, well, positive.
Net Earnings
Net earnings are still negative but, on a longterm look, Gaby Inc has a chance to hit positive numbers should they also get gross margins in line:
There is some cash on hand. But, likely I could see a need to raise cash as there is to raise more. Gaby Inc has about 2 quarters of burn at the above rate, so raising cash and cutting costs will be a must.
Total Equity
Total equity increased with more assets such as the Mankind Dispensary:
On of management’s jobs is to increase shareholder value. Gaby Inc management is doing that. And, I see this as the first innings of a long process.
Cash/Debt Ratio
As I mentioned, there is a burn rate and the $3.1M cash on hand will need to increase soon:
Cash is an issue, I think. While they are not really at a level where this is a huge problem, they will need to raise cash in order to keep operations afloat.
Gaby GABLF Stock Chart
Some of you love these kinds of companies. There is some momentum and management has the tools necessary to get there. And, no one is really paying attention to Gaby Inc, so this could be an interesting opportunity for a few of you.
GABLF Stock Chart
GABLF stock has largely gone flatline. If you are considering this as an opportunity there is not much activity and it may be that you have to wait some time until the company really starts to get there:
But, I caution on this one thing: There is likely to be a cash raise and that may be dilutive. Afterwards, should Gaby Inc start to gain more momentum, increase gross margins, and start to increase revenues organically in the stores they are already in, that could be a launching board.
Is Gaby GABLF Stock A Good Buy?
I could see the argument for wanting to get into Gaby Inc. Management is strong and they are going to want to roll out dispensaries. But, 10 seems awfully small. At the same time, if management could continue to grow sales organically in teh 200 stores they are already in while simultaneously start opening new dispensaries along the way the foundations exit for a cannabis company that has a future.
In the meantime, Gaby Inc needs to raise cash and, personally, I would not front that. Likely, there will be a large independent cash raise. After that, that might very well be the time to get in. If in the next few weeks Gaby Inc releases financial information that shows a solid increase in gross margins, and they also get a sizable investment, Gaby Inc could be a longterm opportunity.
I am going to put them down as a cannabis stock to watch. And, with that, we should do that.
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