Verano Holdings VRNOF stock is one of my top picks. I wanted to add in the VRNOF stock forecast and update with the latest financial release. Verano Holdings has increased revenues and looks like it will continue to grow revenues over the next few quarters as it achieves its revenue run rate. The latest numbers show both improving revenue and margin metrics. Given economies of scale, this is likely to get Verano Holdings closer to profitability.
Continuing in this vein, should we get some kind of medical rescheduling announcement, it will be interesting to see if we also get any potential news from individual companies if they will tell us future tax savings. There is some projected 7.50% – 8.50% in tax savings that each company could see trickling down to their bottom line.
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Verano Holdings Financial Data
Verano Holdings Gross Profits
Revenues increased and the latest numbers are a record quarter for Verano Holdings. Revenues pushed to $234M for the quarter. Gross margins slid slightly and this is something that I have been keeping an eye on. As Verano opens more and more dispensaries – they now have 131 nationwide – these incur costs initially. These dispensaries need to grow into their new environment. They cost money and until organic growth at each individual store grows to the level where they are sustainable, this will have the effect of diminishing gross margins until each of these dispensaries gets to profitability.
Given that, looking at where Verano Holdings is, as they continue to open up more and more dispensaries, and continue to grow into their existing facilities, this ramped up production builds economies of scale. That will overcome certain costs and dilute cost per unit, improving gross margins.
Improving margins will really propel VRNOF stock in the long run.
Verano Holdings Operating Profits
Operating costs have not reached a more flatline level and this has pushed operating efficiencies higher by a small amount. They are running close to 50%. With organic growth, Verano Holdings could see their revenue increase while maintaining a more consistent operating costs. Since this is a mathematical metric of operating costs relative to total revenue, should operating costs move upward at a much lower pace than gross revenues, operating efficiencies will begin to move lower and lower – the desired effect. For now, with the increased revenues, operating costs moved upward in kind.
Eventually, however, operating costs are likely to level out somewhat as the company builds a more complete workforce. This is a key factor in these early stage growth stocks. And, this is something that you really want to key in on and keep track of. This is the slingshot that will drive VRNOF stock upward.
Verano Holdings EBITDA & Net Earnings
EBITDA was somewhat diminished this quarter and that strikes at the lower gross margins and lower operating efficiencies. However, mostly Verano Holdings has been positive with its EBITDA numbers for many quarters.
It will be economies of scale and individual dispensaries that get to profitability that will eventually push gross profits above 50%, with operating efficiencies hitting sub-25%. This is what will push net earnings to positive. Keeping an eye toward EBITDA profits and its level versus revenue shows someone how close Verano will be to net earnings positive.
Verano Holdings Cash On Hand
These bigger cannabis companies will not have much of an issue raising capital. And, if Verano Holdings returns to profitability quickly, this influx of cash can be put to good use with even more CapEx and expanding dispensary count.
It is a virtual foot race to get in to as many markets as possible and open as many dispensaries as possible. Verano Holdings is seeing positive initial success in New Jersey market and, being first to market in some of these places will be key.
Look for Verano Holdings to continue to utilized existing cash on hand for increased CapEx which, that is going to really play out big in the long term, something a lot of short-sighted investors will miss.
Verano Holdings Total Equity
Look for big increases in Total Equity over the course of this year and into next year. The amount of CapEx that Verano Holdings is spending will play out here as they build up capacity in several markets.
Equity is that metric that creates the potential for revenue & profits. With the amount Verano Holdings spends relative to revenue, the future will be very big.
Verano VRNOF Stock Forecast
Verano Holdings VRNOF Stock DCF
Many analysts have begun downgrading Verano future revenue potential. But, until I downgrade the VRNOF stock projection I am going to watch to see how the rest of the year plays out with cannabis federal legalization as well as that Verano has stated they are going to ease back on CapEx spending. This will trickle in to the bottom line which would improve the overall VRNOF stock forecast.
Putting together the VRNOF stock forecast is a bit of a juggling act since there will be increases in revenue later but, there will also be a small decline in EBIT rates. However, this will all change moving forward as management at Verano guides the acquired companies toward improved metrics.
And, with future expansions playing out, Verano Holdings will continue to grow. They are starting to invest even more in states where there is likely to be a shift to adult-use legal (Pennsylvania). The CapEx they are doing will add continuous revenue potential for the future.
Given the shifts we are likely to see, as well as metrics for Verano, VRNOF has a lot of upside. I need to be prudent with looking at ratios and how Verano performs regarding adding what the outcome looks like.
I am going to have to continually update the VRNOF stock forecast as new data continues to come in. I will adjust the EBIT rates as they increase and decrease, and I will add in new acquisitions as they come in.
Is Verano Holdings VRNOF stock a good investment
Investing is a popularity contest and, Verano Holdings, being one of the bigger stocks, will be a target by many in the future once cannabis federal legalization kicks in. Verano Holdings will garner a great deal of interest and, if VRNOF stock up-lists to Nasdaq, this will be a boon to trading volume. Factor in the potential earnings with revenue growth rate, VRNOF stock will get significant support.
On a percentage basis of revenue, CapEx expenditures for Verano are large. These expenditures will create massive future potential as Verano moves forward. I used an accelerated revenue increase for Verano Holdings over the next five years, and this will add in significantly.
Being that it is so large, and the framework of what Verano Holdings has done in the past, I see a lot of upside with VRNOF stock. Although I am softening the revenue outlook up front, there will be bigger gains down the road (Thsi is difficult to calculate within a DCF).
Nonetheless, I reiterate a big move updward with VRNOF stock.