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Harvest One HRVOF stock Forecast & Analysis

Harvest One HRVOF stock is a cannabis wellness company operating throughout North American markets in both OTC and where licenses are required.  While Harvest One has been operating for more than four years, the metrics are not quite there for me to pull the trigger on this cannabis investment.  Improvements have been incremental, or none at all which makes putting together HRVOF stock forecast difficult to calculate if HRVOF stock would be good cannabis investments.

When a venture first starts out, it puts together a plan and executes that plan.  The plan is the way forward for the company.  There needs to be a methodology to getting facilities created and products to market.  Then, scaling up product sales should get a company to profitability.  After sales begin, the big move next is EBITDA break-even and then profitability.  Finally, scaling up beyond that will eventually get a company to net earnings profitability, the ultimate goal.

At this stage, after being in business for over five years, I would expect a company to have achieved EBITDA profitability.  Harvest One has not gotten there yet, nor does it appear to be close.  However, they have made incremental gains towards that objective.

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Harvest One Cannabis HRVOF stock Forum & Discussion
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Harvest One Financial Data

Here is a breakdown of Harvest One Q4 financial data via Harvest One Financial Data

Harvest One Gross Profits

Revenue increases are stalling with quarterly revenues stuck just below $2M per quarter.  Whatever the plan that Harvest One currently has, it is not enough to push revenues higher and, the only way to gain economies of scale is to have increased revenues.

Gross margins are not that problematic for now. If there were gains in revenues, this would add margins to the bottom line.  But, the static nature of revenue is where the issue lies.  And, operating costs are also an even bigger issue as running the company is costing such a big portion of revenue.

Harvest One Operating Profits

Operating costs are such that they are triple digits compared to current revenue levels.  If Harvest One were to triple revenues up to more than $6M quarterly, while simultaneously maintaining a static operating cost level, then the numbers would be where they need to be.  But, operating costs are not linear; they increase with revenues as there are increases in “Sales” from SG&A.

This means that at the current level, revenues would likely need to increase by 5x with a relatively lower increase in operating costs.  This is a mountain to climb that, given the static revenue, I cannot necessarily see a way forward.

Harvest One EBITDA & Net Profits

EBITDA profits are such a key goal for a company.  EBITDA stands for Earnings Before Interest, Taxation, Depreciation, & Amortization.  Basically, EBITDA is the core of a company where you take a look at revenue and subtract the cost of goods & operating costs.  If a company can pay the bills from its revenues by achieving economies of scale where there are enough products sold to pay the costs to run the company, then having achieved this metric is an important milestone.

The only real costs beyond the cost of goods & operating costs are financing costs that are found in continuing costs, the third section of the financial statements.

The important thing is that once the core costs of a company are covered, then any new products making their way through production will have outsized margins.  We call the next product going through the system a marginal product.  The question then is, what are the marginal profits?  Once a company achieves EBITDA break-even, or net earnings positive, should they sell one more unit, this will add profits at an increasingly higher rate.  This is why EBITDA profitability is so important.

But, Harvest One is lagging here.

Harvest One Cash On Hand

On a debt comparison basis, Harvest One has sufficient cash on hand to weather the future until they get to break-even status.  But, on a cash burn basis, this is not really the case.  Cash burn was $1.3M for the quarter, but Harvest One has only about $2.5M in cash on hand to finance further operations.

Because of the cash position and cash burn rate, Harvest One is going to have to lean on its assets for debt financing.

Harvest One Total Equity

What does it take for a company to create revenue?  Assets.  But, often there is debt associated with that.  So, if a company wants to increase revenues, it needs to continually invest in assets while minimizing debt.  The difference between the two is equity.  In the case of Harvest One, assets are continually declining.  This is one reason why there is simply no real upward move in revenue.

And, if a company is not increasing equity, shareholder value is not increasing either; the reason HRVOF stock has been stagnant for so long.

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Harvest One HRVOF Stock Forecast

Harvest One is a ways off until I can do the HRVOF stock forecast.  I typically wait until a company achieves EBITDA profitability and can put the pieces together accordingly.  I will pass on the HRVOF stock forecast for now.

Is Harvest One HRVOF Stock A Good Investment?

Harvest One HRVOF stock Forecast & Analysis Showing HRVOF stock sliding downward

After being in business as long as it has, Harvest One should have achieved EBITDA positive by now.  Also, if the product were to have been quality enough, revenues should have also been going upward.  The stagnant status of revenue growth and lack of ability to get to the point where it was no longer losing money.

For now, the plan that Harvest One has is not working as growth is flat; they need to find another plan.  Then, if that plan were to start to move the company forward, that will be good.  For now, I would pass on HRVOF stock as a potential cannabis investment.

Harvest One Financial Data

Harvest One HRVOF stock Financial Data

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