Bhang BHNGF stock, makes one of the best selling edibles in the market. They have distribution with Trulieve, TCNNF stock, that is expanding throughout all of Trulieve’s dispensaries (initially starting in Florida & Mass). Also, Bhang has worldwide distribution with its CBD chocolates. Generally, it is a very well-accepted product; you have to be to be the #1 & #2 selling edibles products. The metrics are increasing but, there is still a long ways to go for this cannabis stock.
When you start digging around you realize there is a lot going on with partnerships and stock ownerships. So, if you are looking for an interesting pot stock that will go up, take a good look at what is all happening with Bhang. There is a lot going on here and, this may be an opportunity to pick up a penny stocks to buy now that is about to take off.
First, setting aside the cross-ownerships, here is the big move for Bhang. The Trulieve partnership expansion should see a big push in product through Trulieve’s 75 dispensaries in Florida and the handful up in Mass. This will push revenues higher as these initial orders are filled and then there will be a continual increase in revenue.
Licensing out products
I think the biggest deal of all of this is simply that Bhang is licensing its products to Trulieve. That means Trulieve will be making and distributing Bhang’s products. There will be hardly any costs associated with that; although sales in SG&A, in total operating costs, will likely increase.
But, what I think is most interesting is that if Trulieve is going to effectively build up a business for another company, the last thing they are going to do is leave it untouched over the long term. Eventually, Trulieve will acquire Bhang, in my opinion.
There is a bit of incestuousness with this pot stock you can buy now: They own a big chunk of another pot stock: Grown Rogue GRUSF stock. Each company owns about 1/3 of the other company.
So, if Trulieve picks up Bhang, wouldn’t it make sense that a continuation would be for Grown Rogue to get acquired eventually, as well? Probably.
These kinds of things lead to M&A activity which, these kinds of things lead to big pops upwards in stock. My thinking is that there will be an eventual merging of the three companies. But, for now these are penny stocks you can buy now.
Finally, there is yet another deal with Plant Based Investments and an 8.5% ownership stake of Grown Rogue by Plant Based. This will also lead to some additional M&A activity down the road.
Bhang BHNGF Stock Comparison
Here are the numbers for comparing the cannabis companies on my Cannabis Stocks – Complete List:
- #79 Market Cap: $10M
- #60 Revenue Growth Rate: 0%
- #10 Gross Margins: 66%
- #76 Operating Efficiencies: 266%
- #64 EBITDA/Revenue: -166%
- #54 Cash/Debt Ratio: 19%
- #74 Total Assets: $0.6M
For now, before any real merges begin, the breakdown of Bhang is not exactly the best.
But, keep in mind two things:
- Bhang has the #1 & #2 best-selling edibles on the market
- Bhang has distribution in one of the biggest marque cannabis companies dispensaries: Trulieve
This is a penny stock to buy now simply because as this progresses forward, there are very big possible merges.
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Bhang BHNGF Stock Financial Data
There is limited financial data at this time, but you can sell work through the numbers and see what might be there with Bhang.
For now, has remained flat, but my expectation is continued increases:
With distribution deals in one of the biggest dispensary networks in the United States, and that partnership expanding, Bhang may expect to increase revenues over the longer period.
But, consider what is about to happen with the licensing of products to Trulieve? Revenues will increase dramatically. And, costs will not since Trulieve is going to do the production.
The one bright spot for Bhang in the financials is gross margins:
This is one of the top-performing metrics with gross margins in the cannabis industry. Continued increases in revenues would mean reduction in overall costs relatively from marginal costs. But, it is operating costs that need the improvement.
Since the Trulieve deal is a licensing deal, more revenues are going to increase through Bhang’s revenue sheet. But, Trulieve does all of the work, so the revenue increases are done with minimal costs.
When you are determing operating efficiencies are a factor of total operating costs divided over total revenue. This tells investors what to expect with regards to how efficiently management is at producing and selling products:
Total operating costs have remained relative flat over the past few quarters. If total operating costs were to remain sufficiently flat, and, simultaneously revenues increased significantly, this metric would improve (You are looking for the lowest number possible).
Given that as a scenario, the average total operating costs were roughly $850K over the past three quarters. If operating costs remained exactly the same, and revenues increased to about $2.5M, operating efficiencies would hit about 35%, a competitive number.
I tried to rationalize where that EBITDA break-even level is and it might be about $1.5M – $2M. If Bhang saw revenues go through its system of $1M, with an ~35% cost of goods (Giving a 65% gross margin), and with an $850K (85%) total operating cost remaining constant, this puts gross costs and operating costs, in total, at about 120% of revenue. Take out the Depreciation & Amortization, and Bhang is very close at this level with EBITDA profitability.
So, the relationship with Trulieve and other dispensary systems needs to play out. Thing is, I can see Bhang’s operating costs being covered very quickly. On a quarterly basis,
Until revenues increase enough to cover total operating costs at a level that increases efficiency percentages, EBITDA is going to remain negative:
Once Bhang achieves EBITDA profitability, then continually scaling up revenue will trickle downward through the financial statement. Look for measurable increases as revenues move higher. I think we see this in likely just two quarters as sales ramp up in Trulieve dispensaries.
Elusively, net earnings are down and this is likely to be that way until the full sales numbers push through Trulieve’s dispensaries:
My first focus is going to be, and always is, EBITDA profitability. But, I also have a feeling that Bhang is likely to see a big pop in revenue, a significant improvement in cost metrics, and EBITDA will occur rapidly. And, I am betting that Bhang is also likely to print net earnings positive rapidly along with the changes in EBITDA.
Cash On Hand
There is not a lot of cash on hand right now in Bhang’s accounts:
This is something that I think may be an issue; Bhang is going to need a little bit of operating capital. It would be easy for them to raise capital as they can turn to any capital venture and show them where they will be in a very short period of time. This could be dilutive to the stock, and that is something that I think is a potentially small issue.
Still, if there was a way for Bhang to hold out until they start receiving their revenue stream from Trulieve, then this would get them there. They could easily just factor out their accounts receivables and take a small cut in total revenues to hold them through.
Cash Debt Ratio
If there is a substantial increase in cash coming from the future potential revenue from Trulieve, the cash/debt ratio will improve significantly:
For now, without any real bright future ahead, this could look negative. But, if Bhang can get creative and factor out accounts receivables, they would be able to service their debt load and immediate operations.
For a smallish company, Bhang will see continued increases in total equity as their partnerships solidify:
This is the engine of growth in revenue, the ability to create revenue. Outside of the partnerships, Bhang could increase its distribution with other companies and grow rapidly.
Bhang BHNGF Stock Chart
For now, no one seems to have caught on to the potential of this stock:
Bhang BHNGF Stock Chart
BHNGF stock is moving sideways with mostly. This leaves for little downside risk as an investment is only about $0.06 per share. But, I see the risk muted as the eventuality is that increased sales will push operating margins to far better levels. The mathematics favor this.
Is Bhang BHNGF Stock a Good Investment?
I look at this at buying BHNGF stock as an easy answer: BHNGF is a penny stock to buy now!
The rationale is simple. First, when you have the best-selling chocolate edible then you are likely to continue seeing increases in revenues. A company has gotten to the #1 selling excellent products. From that, sales are likely to organically increase.
Second, you have the added benefit of being sold in one of the biggest dispensary systems in the country. This would naturally propel increased sales more and more.
Because of the relationship with Trulieve, it is very possible that there are continued increases in sales as consumers push for more and more consumption. There is a likely eventuality in the fact that Bhang stock, as well as Grown Rogue, and Plant Based Investments, gets acquired entirely by Trulieve TCNNF Stock. Trulieve would easily be able to expand distribution nationwide and push this product to a whole new level. That is enticing for many factors.
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