InterCure INCR Stock Forecast & Analysis

InterCure Ltd. INCR stock is one of the cannabis stocks I have my eye on and I wanted to get the INCR stock forecast out to you guys.  This is an Israeli-based medical cannabis company that is expanding into other areas such as Germany & the United Kingdom.  InterCure has increasing revenue, positive EBITDA, and near positive net earnings and just reported a record-breaking quarter for Q2 profits.^[1]InterCure Press Releases  They have strategic partnerships with several other key cannabis companies such as Clever Leaves CLVR stock, Tilray TLRY stock, Organigram OGI stock, Cookies, and a few other cannabis companies.  I expect InterCure to continue to grow and increase its profits and, with Federal Legalization just around the corner, INCR stock will do well.

It is important to note that Israel is considering legalizing adult-use cannabis but, for now the medical only market is substantial.  Also, Israel happens to be a country where there is considerable research being done with cannabis.  Israel is very liberal in that regard and, adult-use legalization would mean significant market potential.

Also, Germany is expected to legalize adult-use cannabis shortly and with InterCure already establishing themselves in Germany, that footprint will be important.  Germany has a population of 84M.  This, in comparison to California and all of Canada, 39M & 35M respectively, outsizes these jurisdictions by more than double.

Given that, there is tremendous upside opportunity for InterCure.  And, already the numbers are impressive and continually increasing.

InterCure Financial Data

The latest financial data shows that InterCure is advancing upward.  The charts for InterCure financial data are reminiscent of some of the bigger cannabis stocks when they were first ramping up.

I look for economies of scale to really improve the bottom line.  This is going to be the hallmark of InterCure.  They are well positioned in international markets that are about to go adult-use legal.  Given their already very solid revenue growth and margins, being able to sell to a much wider consumer base is going to be very positive for many years.

InterCure Gross Profits

The rate of growth of revenue increases is jaw-dropping.  This is similar to some of the bigger US MSOs in their earlier days.  And, I expect far more to continue as InterCure is so well positioned in international cannabis.

Economies of scale will kick in and, the 45% that InterCure is printing right now will improve significantly over the next several quarters.  Both Israel & Germany are set to go adult-use cannabis legal.  And, seeing that InterCure is well positioned with these two countries, I expect there to be big jumps in revenue in what is already a company that is jumping big.

As more product works through the production facilities, and more revenue is earned, gross margins will improve to levels more competitive with other cannabis stocks.

This will be a big focus for me with InterCure, watching this particular metric: gross profits & gross margins.  This is where InterCure could shine with its ability to squeeze out more juice, so to speak.

InterCure Operating Profits

At 27.5%, InterCure is just on the cusp of hitting a sweet spot for operating efficiencies.  Most cannabis stocks that are hitting their stride are printing between 30% – 35% in operating costs relative to revenue. But, that is just the beginning.  As these companies start to push revenues higher, you can look to see the rate of growth of operating costs to hold back.  The goal is to achieve approximately 15% – 20% in operating efficiencies.

As these companies mature over the next couple of years, this is the metric that will see a great deal of long-term improvement.  But, with InterCure already printing 27.5%, they are ahead of the game with other players.

I am really looking forward to both Germany & Israel switching to adult-use cannabis legalization.  Should this happen, companies well-positioned, such as InterCure Limited, are going to do very well.  The fact that InterCure Limited is already pushing its margins and profits at this stage shows they are a company that will lead.

InterCure EBITDA & Net Profits

At 22.9% EBITDA/Revenue, InterCure Ltd. is right about average versus the broader market.  But, there is a great deal of upside potential that the market is not realizing yet for INCR stock.

If economies of scale kick in with increasing revenues, and InterCure can push gross margins up to a more normalized 55%, that extra 10% will go a ways to increasing bottom line profits.  But, what if economies of scale really kick into overdrive with rapid revenue growth?  What if InterCure can continue its revenue growth and hit 65% gross margins?

Some of the best cannabis stocks are printing 65% gross margins.  And, these companies are doing so with higher unit volume which, InterCure is clearly on track to accomplish.  The 20% increase is $5M this quarter of pure profit over top of costs that are already being covered.

And, I’m loving the operating costs relative to revenue at these levels.  If InterCure can get an additional 10% out of operating efficiencies, this will potentially add even more profits to the bottom line.

InterCure Cash On Hand

From a cash-to-debt ratio, InterCure is sitting at the top of the pile when compared to many other cannabis stocks.  At 90% cash-to-debt ratio, there is plenty of room here for InterCure to work.  And, when the valves turn on and InterCure starts printing positive net earnings again, more consistently, InterCure will add to its war chest.  This will give InterCure the ability to really expand into these new international markets without having to fret about the “how” of it all.

The previous two losses to net earnings were largely one-offs that will reverse quickly.  Then, with a higher level of economies of scale, and improved margins, InterCure will be able to maximize its ability in any period of time, wringing out as much profit as it can.

And, this cash will be a tool that can be used to leverage continuous opportunities in the future.  Cash is king.  InterCure will do well because of its position.

InterCure Total Equity

Equity is such a big deal to me, and InterCure is on the right track here, albeit… slowly.  There have been increases in total equity in the past three quarters.  But, I expect this will ramp up big as new possibilities come on line and continued revenue increases provide more working capital from profits.

To me, increasing total equity shows that a company is able to create value for investors.  Equity is the difference between total assets less total liabilities.  If equity continues higher, the ability for the respective company to generate revenue and profits is there.

Being an international company, InterCure is well poised to take advantage of these opportunities.  I believe the international market is going to be far bigger than the US market over time.  And, diversifying into these international companies is an opportunity that long term value investors should not pass up.

InterCure INCR Stock Forecast

InterCure INCR Stock DCF

Looking at the multiples that I used for the INCR stock forecast, I kept this at bay.  Easily, I think I could have pushed the metrics to 45x – 65x (versus 35x) seeing how fast InterCure Limited is growing.  If I pushed 50 into the system, INCR stock forecast moves up 50% to $29.

Also, I kept margins at bay and expect that margins will increase a bit more over time.  For now, the 45% gross margins are slightly soft and, through time this will push upward.  Also, this will affect the bottom line.

And, if InterCure can continue its expansion and keep operating costs down, the 27% they are printing will add to EBITDA even more.

If InterCure continues with its strong revenue growth and can increase its economies of scale correlative with that increase in revenue, InterCure will be a very profitable company over many years.  These are the entry points that could mean a great position over many years.

But, before you hit that buy button…

Is InterCure INCR Stock A Good Investment?

InterCure INCR stock has a lot working for it.  Revenue is growing swiftly.  There are a lot of coals in the fire that is already starting to glow brightly.  With increasing revenues, an improvement in EBITDA/Revenue percentage is just around the corner.  If there were an increase in gross margins of 10%, all of a sudden the story changes quickly.  10% is, of course, moderate.

Then, you couple all of that with the fact that INCR stock is Nasdaq-listed, and its ability to draw in a big crowd will push INCR stock upward.  With cannabis federal legalization just around the corner, this is a strong tell that this is a stock that will see a tremendous amount of reaction to positive news.

My thinking is that INCR stock will head much higher during the course of the year.  But, prior to that, owing to the drop in the broader stock market and sentiment in general, the $6.00 may be rich at this point.  I would target $4.00 – $5.00 as an entry point.  But, ultimately, $20.00 is around the corner for long-term value investors.

Company Financial Data

InterCure INCR Stock Financial Data