In Search For The Ideal Marijuana Related Stock – Part II
This is the final chapter in our quest for the ideal marijuana related stock. In part 1 of our series, we dismissed the biopharmaceutical companies active in the medical marijuana space, because, in most cases, their research is still in very early stages. In addition, these tests involve lots of uncertainty, take very long to complete and require lots of money. So let’s take a closer look at another side of the industry.
Along with the growing number of US states that allow marijuana use for medical or recreational purposes, numerous companies arise that offer ancillary products and services related to the sector.
Ranging from providers of security, advertising or insurance services to manufacturers of grow boxes or suppliers of horticulture products. We were happily surprised to find that these businesses are often the most dynamic ones in the industry. This doesn’t mean however that you shouldn’t be cautious when you want to invest in some of these companies.
Medbox, Inc. (MDBX – $18.63), for example, is mainly known for its patented medicine dispensing systems to medical and retail industries. In addition, Medbox is developing merchant services and armored transport for cash deposits, cannabidiol research and development, real estate acquisitions and subsequent lease programs to alternative medicine dispensaries, and alternative medicine dispensary management services.
What sounds interesting at first, quickly turns ugly when we pull up MDBX’ latest 10-Q for the quarter ending March 31, 2014. The company reported sales of $331,770 and a loss of $1.25 million. To make matters worse, Medbox has a current market cap of… $568 million!!!
Another company that caught our eye was Creative Edge Nutrition Inc. (FITX – $0.06) because it announced earlier this week that it appointed Deloitte as its audit firm. A move that can only be applauded as it gives the plagued industry more credibility.
FITX partially owns CEN Biotech, Inc, which supplies the Canadian public with pharmaceutical-grade medical cannabis under the newly established Marihuana for Medical Purposes Regulations (MMPR).
For the quarter ending March 31, 2014, the company reached revenues of $5.16 million, up almost 10-fold compared with the same period last year. Net income for the first quarter of 2014 was $2.83 million, compared with a loss of $1.11 million in the first quarter of 2013.
So all thumbs up? Alas. The company has over 3.4 billion, yes that’s right billion, shares outstanding. So despite it having a very nice income, Earnings Per Share were $0.00.
Unfortunately, the number of attractive marijuana related companies in the market today is very low. However, our firm believe in the potential of the marijuana industry is unaffected, as there’s clearly a huge, largely untapped market in the United States and around the world. It is estimated that the medical marijuana market alone could surge to $8.9 billion by 2016.
As a result, we’re going to continue to follow the developments with the active players in the market and we’re also going to look out for new companies expected to begin trading soon. We’ll keep you up to date and alert you when we discover a stock with strong potential in the cannabis sector.
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