Red, White & Bloom RWBYF Stock – longterm upside potential with growth

Red White & Bloom RWBYF stock is set for longterm appreciation.  Red White & Bloom has laid the framework for a vast footprint.  But, this process has taken some time, but that is part of the business.  You do not simply announce your intentions one day and then open your doors for business the next.  I have said this many times: The business of cannabis is a process; it is not an event.  Given that, a lot of the hard work has been done and now Red White & Bloom is set to harvest the fruits of its labor.

I am a data hound and this is where I gravitate towards whenever I analyze a company.  Also, I am firmly entrenched in a mantra of ‘dollar votes’.  Even more, I do not consume any kind of cannabis products… except the financial data.  And, I do not focus on the products in a sense that I believe one product is better than another.  Instead, I look towards revenue growth and from there can decide if the general population is buying up the product.  This is a popularity contest, after all.

Red White & Bloom RWBYF stock is prone to hype.  When I first got back into the swing of things with analyzing cannabis companies I was forewarned to largely skip over this company.  I have.  But, they are starting to print big revenue numbers with more to come.  I don’t like skipping over big growth potential.

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Potential $200M run rate

Red White & Bloom is on a $200M run rate given by their current footprint and what will unfold throughout the remainder of the year.  Unfortunately, there is not much in the way of financial data to look at.  The RWBYF stock website has financial data from 2018 – 2019.  We are rolling up on Q2 2021.  But, we do have a couple of data points that we can look at and see what could be possible.

The $200M run rate is what I am focusing on.  If Red White & Bloom RWBYF stock were an “average” company in the top performer arena, what would the stock be valued at?

Given that, as we are on the eve of yet an additional quarterly release, what could Red White & Bloom be valued at?

Red, White & Bloom RWBYF Stock Financials

Here are some data points to consider and what to look for in the future for Red White & Bloom:

  • $200M Run Rate
  • 450M Shares Outstanding; fully diluted
  • 55% Gross Margins
  • 40% Operating Costs
  • 10% Continuing Costs

Given this right here, with a $200M run rate, we can break this down to figure out where the market should  value RWBYF stock.  Given these very modest numbers, RWBYF Stock would be bringing in ~5% in net earnings on the $200M; $10M.  That is an EPS of $0.022.

Future earnings multiples

This is where the fun begins with trying to figure out where RWBYF stock should be.  Mind you, I used the word ‘should’ and I’m doing that purposefully.  The market has not been too kind to cannabis stocks lately and that is probably because cannabis stocks have not been too kind to the market in the past.

The S&P 500 is valuing companies at a 40x future earnings multiple.  And, you need to keep in mind that the S&P 500 has an average revenue growth rate of ~3.5% for the 500 various companies.  Most cannabis companies are coming in about 22.5% annually.  Because of this, if there is enough information to warrant a higher future earnings multiple then you should apply this to that marijuana stock.

In the case of Red White & Boom, they are likely to outpace even average cannabis companies.  With these companies, I usually use about a 100x future earnings multiple.  That puts RWBYF stock at $2.20, or thereabouts.

The caveat?  We only really know the future run rate for this year.  What we need to find out is what kind of metrics RWBYF stock will be printing and what happens with the run rate after this year.

Even more future projections

Most cannabis companies are going to achieve a certain level of metrics such as margins and costs.  Management would be pushed to gain ground in metrics across the board, so I never doubt future margins and costs.

But, will any one company outpace another?  We won’t know this for some time.

The other thing to consider is what happens beyond the $200M run rate?  What revenue projections could we glean from what information we do have?

Analysts I have seen around are more-than doubling their projections for RWBYF stock revenue run rates to about $425M for FY 2022.

During that time, I would expect significant improvements with metrics such as gross margins, and operating efficiencies.  If that were to happen, RWBYF stock would be on pace to move far higher.

Fiscal Year 2022 Metrics

With a $425M revenue run rate potential, here is a breakdown of what the RWBYF stock could be looking at:

  • $425M Revenue
  • 450M Shares Outstanding
  • 60% Gross Margins
  • 35% Total Operating Costs
  • 10% Continuing Costs
  • 15% Net Earnings: $60M
  • $0.133 EPS

Given a 75x – 100x future earnings multiple, RWBYF stock projection could be in the range of $10.00 – $13.50 per share.  RWBYF stock is a cannabis stock to watch.

Red, White & Bloom RWBYF Stock Chart

Despite any upside potential, and like just about every other marijuana stock out there, RWBYF stock is sliding lower and lower:

Red White & Bloom RWBYF Stock
Red White & Bloom RWBYF Stock

For a long term investment, I see this as a potential opportunity.  But, if you already own RWBYF stock, I can see this as disconcerting.

The market will have its day.  Investing in marijuana stocks is not an event; it is a process.  These companies will continue to build up their respective businesses.  They will gain revenue increases and margins & costs will continue to improve.  Once this catches the eye of astute investors that are earning sub-par earnings, they will start to gravitate towards these higher yielding opportunities.

MSOS AdvisorShares Pure Cannabis ETF

Checking in with MSOS is always a good idea to compare the more mainstream US Cannabis companies to the most current price movement.

MSOS US Pure Cannabis ETF
MSOS US Pure Cannabis ETF

In the meantime, even the MSOS ETF is slipping today.  I can see this trend continuing.  If you have been looking to get into any of these companies this may be a great opportunity.

When the market falls

As long as interest rates remain at ultra-low levels, look for the stock market to move higher.  But, once this changes, then investors may start gravitating towards other opportunities.  Then, cannabis stocks may be in play.

Given that, I can see RWBYF appreciating over the long term.  It may take a moment before astute investors start to gravitate towards this stock, however.

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