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“[:\/a-zA-Z0-9_\-]+)?(\.[a-zA-Z0-9_\-\/]+)+)" data-type-override="url"> Message Submit Δ Recent Marijuana Stock Analysis Here are the most recent marijuana stock analysis articles: Sundial SNDL Stock Acquires another – They will be massive Gaby GABLF Stock With Advancing Metric…”
MariMed MRMD Stock is poised to continuously increase in value. MariMed has the #1 selling edible product – Betty’s Eddies – in several states and they are expanding in even more states. MariMed’s Q2 numbers were extraordinary; yet, they are not necessarily the best performing. They are in Illinois and one of the things that MariMed is working towards is going fully vertical. Their current strategy of licensing their products prior to entering a new state and then building into that state is solidly increasing their revenues – thanks in part to their excellent product line. Going fully vertical will enable MariMed to take complete control of its direction.
I am very bullish on MariMed; MRMD is one of my Top Picks – One of the Best Marijuana Stocks to buy now. If they continue to move into new markets and expand in their existing markets then, this is a company that will continue to grow and move higher. For now, the stock appears to be immune to the selling we have seen in pot stocks.
MariMed MRMD Stock Comparison
Here are the numbers for comparing the cannabis companies on my Complete List of Top 100 Cannabis companies:
- #22 Market Cap: $265M
- #24 Revenue Growth Rate: 32.5%
- #16 Gross Margins: 59.2%
- #4 Operating Efficiencies: 22.4%
- #4 EBITDA/Revenue: 39.0%
- #22 Cash/Debt Ratio: 45.1%
- #32 Total Assets $62M
What is impressive to me is that the revenue growth continuously increases quarter after quarter. The 32% increase is not, by any stretch, a one-off. Yet, they are only ranked #24 on my list of Top 100 cannabis companies.
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MariMed MRMD Stock Financial Data
MariMed has impressive numbers across the board. When you go through the numbers below you will see why this company is one of my favorites.
Revenue
Impressively, revenue growth continuously increases quarter after quarter:
As MariMed continues its expansion in the current states these numbers will continuously increase. They are seeing both organic growth and new growth in their stocks.
But, MariMed is a medical product. And, there are some 32 states that are medical-legal (with an additional 18 being adult-use legal). The potential growth for MariMed is extraordinary when you consider that they could move into many other states. Even if they merely targeted the adult-use states that would get them into 12 more states; they are currently in 6 states with Puerto Rico.
The driver in some of the sales was licensing agreements that MariMed has executed in the states where they do not have grow, process, and dispensaries. These licensing agreements will continue to increase sales revenues. And, MariMed has the potential of moving in to some of these states and build their own dispensaries, processing facilities and grow facilities.
I see future growth, on the back of such a well-performing product, being the key driver with MariMed.
Gross margins
For MariMed, gross margins are some of the best in the industry:
There are two factors that will contribute to increased gross margins.
First, organic growth of product sales will drive more product through grow and processing facilities and this will in turn minimize costs on a relative basis. That will improve the metrics.
The other factor is that MariMed is going fully vertical in Illinois and as MariMed grows into this they will increase revenues. On a relative basis, gross margins continually increase.
Over Q2, total revenue grew at 7.5% Quarter-Over-Quarter. MariMed, is easily outperforming this metric and, is, in fact, one of the cannabis companies that is supporting the industry. If MariMed were to increase revenues by 7.5% over the next four quarters, that increases total revenues by 35%. That puts revenues for Q2, 2022, at $45M. Very likely, gross margins would push over 62.5% with that much more additional revenue. That is gross profits of $28M versus the current $20M.
Keep that in mind as we work down the financial statement
Operating Efficiencies
Again, Operating efficiencies are, similarly to gross margins and revenue growth, some of the best in the industry for MariMed:
MariMed is sitting at #4 with operating efficiencies. They have plenty of room to increase costs here and that be justified. Those cost increases, if they were geared towards only driving sales with marketing would easily contribute to additional revenue growth.
If MariMed were to increase their operating costs on a relative basis to 30% of the above $45M quarterly number, they would be spending some $15M on SG&A. Currently, they are printing $7.2M. This would be a doubling of expenses to drive sales and build the necessary infrastructure of a company that is growing and expanding.
EBITDA Profits
In the above example, I have used $45M as the target for MariMed revenue in Q2 2022. With an increase in gross margins associated with increasing revenue and productivity gains, EBTIDA would continue to print 40% of revenue they would print $18M in EBITDA:
These numbers check out. With revenues at $45M, cost of goods at 37.5% (Making gross margins 62.5%), operating costs at 30%, this is 67% of revenue. But, you have to remove Depreciation and Amortization, mathematically getting EBTIDA to 40%.
Net Earnings
If we continue down the financial document, with 32.7% operating profits (40% EBTIDA rate), taking out about 10% of revenue for continuing costs, MariMed would be left with 22.7% of revenue for Q2, 2022. This is about what they printed for this quarter; thus, this checks out:
If MariMed were to stop growing at that moment and continue to print these metrics, net earnings of about $9M per quarter, MariMed would have $36M in net earnings for the for the following 4-quarter run-rate. That is approximately $0.10 per share EPS.
But, I do not believe that MariMed has any chance of stopping growth at that point.
Keep that in mind as we move lower and lower in the financial statements.
Total Equity
Equity will continue to grow, but for a small-ish company, it is lower than I would want to see:
Assets are what create the ability to generate revenue, and, by extension, profits. MariMed is still a smallish company. They would need to build their asset base to really start pushing higher with a stock price.
I do not necessarily see this as bad, just something that if you keep an eye on it will justify any future increase in stock price movement.
Cash/Debt Ratio
While MariMed has enough cash on hand, they also have a balanced amount of debt putting them in the middle-ground of cash/debt ratio comparisons:
The one thing that MariMed absolutely has working in its favor is that they are net earnings positive and cash is coming in to the register. This is a strategically important position to be in. I expect this will continue to improve as time moves forward.
I do not necessarily see a reason to pay off debt, but I would like to see continued use of the licensing agreements MariMed utilizes to enter into a new area and using any cash to build the infrastructure for future revenue opportunities.
MariMed MRMD Stock Chart
Unlike most other stocks, MariMed has largely remained quiet as most other cannabis stocks sold off:
I am going to lay out the case that MariMed is significantly undervalued and the stock would, in a normal investment environment, by significantly higher.
Is MariMed MRMD Stock A Good Buy?
Absolutely. Period.
Given the current environment for the S&P 500, MariMed stock MRMD would be trading at a future multiple of 40x of the $0.10 in profits I laid out in the scenario above. First, I used a very low growth rate for revenue; MariMed is one of the companies supporting the entire industry for revenue growth rate. Second, 40x is mild, at best, when you consider the scenario above. Instead, 100x is more appropriate. Plus, I used a flat-line metric in revenue thereafter. MariMed will continue to see revenue growth and it is likely that the revenue growth rate number exceeds the average I used of 7.5%.
Still, to be conservative, the $0.10 future revenue is a reasonable target. At 100x future revenue growth, this puts MRMD at $10.00 per share. I continually reiterate this target because the math continues to print this up.
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