I have been bullish on Unrivaled Brands UNRV stock because of the future plans of the company; their successful merge they are in the process of completing, and their solid products. As it turns out, so is the broader stock market; UNRV stock is one of the few cannabis stocks that is more consistently heading higher. I analyzed the stock previously and I called for a move of the stock up to approximately $2.00 and at this stage I can continue to see that move of UNRV stock upwards. For now, the discounted cash flow projections give us an idea that UNRV stock should be double its current price with an eventual, and gradual increase upwards to over $2.00. Looking at the various points of interest of the latest financial earnings you can see that this stock is moving upwards as it should – despite all other cannabis stocks languishing.
Unrivaled Brands UNRV Stock Mergers
As I outlined in my original analysis on Unrivaled Brands back in July, Terra Tech merged different companies and now have operations in Oklahoma, Oregon, Nevada, Arizona and California. I am looking for the Silver Streak delivery dispensing system to expand throughout California with an initial opening in the Bay Area. This could be a great contribution to revenue and growth for the combined companies. And, if the delivery system expands outside of California into other states, this could become a powerhouse dispensary and delivery system.
For now, financial data shows big jumps higher in revenue but, that is not organic growth. Rather, revenue increases from the merged companies are the reason for the big jump.
From this point, we will be more able to see what revenue growth will be and the future plans of management.
Unrivaled Brands UNRV Stock Financial Data
Following are the various financial charts for Q3 for Unrivaled Brands.
Gross Profits
Gross profits were about where management expected for Q3. But, it is the future that we look forward to. After the umbrella merge, core products from the legacy business were not being carried in the delivery dispensary system. These legacy products will now be offered across the new umbrella business platform. This will add a significant potential increase in revenue to a very large and expanding customer base. But, because production and dispensing are now completely controlled in-house, expect to see increased margin potential from these products.
Both California and Oregon products are being sold in some 440 & 330 dispensaries, respectively; a large dispensary base. Expanding on that and building the core business product names will be important to continued increases in these markets.
Operating Profits
Management expects to see cost savings from the merged companies show in the bottom line in the next quarter. This is pure mathematics with an increase in revenue and operational cost containment. While Unrivaled is not necessarily the strongest yet in this area, keep in mind this is a merged company now and costs savings will occur in time.
Then, with increasing revenue and improved gross margins, the mathematics of higher revenue versus contained operational costs will allow for competitive levels for Unrivaled Brands. Management will get there. The product mix is strong and the new distribution and dispensing routes will translate into better metrics.
EBTIDA & Net Profits
As you can see, Unrivaled Brands is on track to see EBITDA positive numbers in Q1 of 2022. Then, continued scaling up of the business will see a continued increase in net earnings.
For new businesses, once they start selling products the main goal is to become EBITDA positive. Once that is achieved, this shows that the core business has the ability to become profitable. Then, with marginal profits on increased sales, the outsized profit margins from the marginal product production translates into expanding profitability. This is key and, Unrivaled Brands is just on the cusp.
After this, the business can expect profitability as they grow.
Cash On Hand
At this stage, Unrivaled Brands has sufficient cash to continue with operations, albeit they are on the lower end comparatively versus other companies. There are ample and growing assets to utilize in order to bring in new cash should net earnings positive levels not be achieved quickly enough. But, with EBITDA positive on the horizon, and other income coming in via notes carried, the cash burn rate is relatively low.
Keep in mind that I mentioned back in July that Unrivaled Brands sold assets and carried notes on these. That is income (not revenue. This will show up in continuing costs). This extra income increases the cash flow to the business but only affects net income on a percentage basis versus revenues when looked at from the angle of margin metrics.
Total Equity
As mentioned, Total Equity continues to rise on the back of increasing assets with moderation in growth of Total Liabilities. Assets are the engine of growth for a company. Accumulating and growing assets allow for a company to increase its revenue base and, after achieving certain milestones, profitability. Always check for increasing assets, liabilities that are in check, with the math adding up to increasing equity for a shareholder.
Likely, however, and as I mentioned just above, there may need to be some cash coming in to the business. There may need to be some debt financing. But, I do not see any kind of need for Unrivaled Brands to hit the cash register and dilute shares. Nonetheless, I am vigilant on this that Unrivaled’s cash position is something to keep an eye on; likely a smaller issue.
Unrivaled Brands UNRV Stock Prediction
Unrivaled Brands UNRV Stock DCF
| Assumptions | |
|---|---|
| Tax Rate | 25% |
| Discount Rate | 8.000% |
| Perpetural Growth Rate | 25.0% |
| EV/EBITDA Mulltiple | 25.0x |
| Transaction Date | September 1, 2022 |
| Fiscal Year End | 12/31/22 |
| Current Price | $0.044 |
| Shares Outstanding | 530,455,975 |
| Debt | $103,000,000 |
| Cash | $7,300,000 |
| Market Value | |
|---|---|
| Market Cap | $23,340,063 |
| Plus: Debt | $103,000,000 |
| Less: Cash | $7,300,000 |
| Enterprise Value | $119,040,063 |
| Equity Value/Share | $0.0440 |
| Date | September 1, 2022 | Dec 31, 2023 | Dec 31, 2024 | Dec 31, 2025 | Dec 31, 2026 | Dec 31, 2027 | Dec 31, 2027 | |
|---|---|---|---|---|---|---|---|---|
| Time Periods | 1 | 2 | 3 | 4 | 5 | |||
| Year Fraction | 1.33 | 1.00 | 1.00 | 1.00 | 1.00 | |||
| EBIT | $13,125,000 | $20,000,000 | $28,125,000 | $37,500,000 | $48,125,000 | |||
| Less: Cash Taxes | $3,281,250 | $5,000,000 | $7,031,250 | $9,375,000 | $12,031,250 | |||
| Plus: D&A | $2,625,000 | $3,500,000 | $4,375,000 | $5,250,000 | $6,125,000 | |||
| Less: Capex | $11,250,000 | $15,000,000 | $18,750,000 | $22,500,000 | $26,250,000 | |||
| Less: Changes in NWC | -$7,500,000 | -$10,000,000 | -$12,500,000 | -$15,000,000 | -$17,500,000 | |||
| Unlevered FCF | 1 | $8,718,750 | $13,500,000 | $19,218,750 | $25,875,000 | $33,468,750 | ||
| (Entry)/Exit | -$119,040,063 | $555,078,125 | ||||||
| Transaction CF | - 0 | $11,625,000 | $13,500,000 | $19,218,750 | $25,875,000 | $33,468,750 | $555,078,125 | |
| Transaction CF | -$119,040,062 | $11,625,000 | $13,500,000 | $19,218,750 | $25,875,000 | $33,468,750 | $555,078,125 |
| Upside | |
|---|---|
| Market Value | 1,399% |
| Upside | 41% |
| Intrinsic Value | |
| Market Value | $0.04 |
| Upside | $0.62 |
| Intrinsic Value | $0.660 |
Above, you can see the stock prediction I’ve put together for UNRV stock and how the data plays out over the next 5 years. I am calculating the future revenue to be significantly larger over the next five years and that Unrivaled Brands achieves performance metrics that are in line with the better players.
These guys have the size and footprint to be large being in six different states including California; the biggest single market in the US.
Given the future cash flow over the next five years, I expect that UNRV stock would be valued appropriately at $2,00 – $2.50 at this time.
Is Unrivaled Brands UNRV Stock a Good Investment?
There are many things that I like about Unrivaled Brands and the way management just combined a few different companies together in various states means you are looking at a company that will grow significantly. Expanding the delivery system to other dispensaries throughout all six of the Western US States will make for an ultra-competitive company. The fact that the product mix is some of the best in the market and that they are now able to take legacy products and expand into new distribution ares means higher profit margins on increasing sales.
Plus, the fact that cannabis stocks are so undervalued at this point makes this a strong buy across the board.
My expectation is that the intrinsic value inherent within the cannabis stocks will attract many new investors. It’s a process. And, these cannabis companies are working through that process. Early investors will be well rewarded.
