On Sunday we recommended Isodiol International (LAGBF) which also trades in Canada under the symbol ISOL. The stock on both sides of the border rose over 20% on Wednesday. Since our recommendation, ISOL has risen from $0.23 to $0.30 CAD in three trading days. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel.
ISOL was up on a follow up announcement of Q1 results that confirmed profitability for the quarter:
"VANCOUVER, BC / ACCESSWIRE / July 26, 2017 / Isodiol International Inc. (CSE: ISOL) (OTC PINK: LAGBF) (Frankfurt: LB6A) (the "Company" or "Isodiol") a global cannabis innovator, specializing in the development of pharmaceutical and consumer products, announces the operational numbers of its wholly-owned subsidiary for the period from April 1, 2017 to June 30, 2017. Iso International LLC recorded unaudited fiscal Q1 profits of $897,596 based on revenues of $4,919,693 CAD.
Marcos Agramont CEO of Isodiol stated, "Demonstrating Q1 profitability is a major milestone for our company and our investors. The cannabis industry on a whole will be legitimized by demonstrating successful commercialization and operating in an environment which promotes the cannabis movement. We have developed product lines and brands which will generate revenues and profitability and now we're positioned to begin exploring additional expansion opportunities. Vertical integration, expanding product distribution channels and out-of-state manufacturing and processing are all opportunities we will aggressively develop and execute."
About Isodiol International Inc.
Isodiol International, Inc. is the market leader in pharmaceutical grade cannabis compounds and the industry leader in manufacturing and development of consumer products. Isodiol's nutraceutical division is the pioneer of many firsts for Hemp-derived cannabidiol (CBD), including 99% pure crystalline isolate, micro-encapsulation, and nano technology for the highest quality consumable and topical skin care products.
Isodiol's growth strategy includes the development of over-the-counter and pharmaceutical drugs, seeking joint ventures and acquisitions to expand its portfolio of brands and subsidiaries and will aggressively continue International expansion into Latin America, Asia and Europe."
The results are unaudited and will remain so until the annual report. Maybe some investors will remain skeptical until then as there could always be write-offs and accruals demanded by the auditors that could impact profitability on the entire year. However, this concern would be the same for all cannabis companies and microcap stocks in general when it comes to the quarterly results. The company is due to release its unaudited financials in the next few weeks so that will provide more clarity.
On Sunday we said that we believe that ISOL could be a $2.00 stock and figured it will be at least $1.00 by the end of the year. The following chart should provide more clarity around that. This chart compares ISOL to some of the most popular cannabis stocks trading in Canada. That is Canopy Growth Corporation (TWMJF), Aurora Cannabis Inc. (ACBFF), Aphria Inc. (APHQF), OrganiGram Holdings Inc. (OGRMF), Supreme Pharmaceuticals Inc. (SPRWF) and Emblem Corp. (EMMBF).
These are the last reported quarter results which we then annualized (multiplied by 4) to come up with their revenue and earnings multiples. We used this format because revenue is growing quickly for many of these companies and using the trailing four quarters would understate the current revenue run-rate. While this method may not be perfect and may not fairly present the investment case for each of the other companies listed, it clearly shows the investment case for ISOL. All figures are in $CAD. We took all this data from news releases or SEDAR filings manually (SEDAR is the Canadian equivalent to EDGAR) and we are human and might have made an error. So don't just take our word for it, compile this data for yourself.
ISOL has a revenue multiple of 2.6x. The next lowest multiple belongs to WEED at 25.8x, nearly ten times higher. The rest of the companies have revenue multiples above 40. ACB has the thinnest of profit margins but the rest have negative earnings while ISOL has an earnings multiple of 14.5x when Q1's great result is annualized. So while the other cannabis companies trade at very aggressive multiples because of the growing medical marijuana industry and movement towards legalized recreational use, ISOL is trading at valuations similar to a boring, old retail stock.
ISOL has similar revenue and higher profits to ACB and APH last quarter but it trades at barely over 5% of their market caps. Put another way, ISOL has to move 15-20 times higher, or $4.50 to $6.00, to align with those companies on a revenue multiple and will still operate at a higher profit level.
Does the market wish to give the major MMPR growers like WEED and ACB a premium versus something like ISOL which concentrates on CBD and cannabis-infused products? Perhaps. But is that premium justified at 10-20x? We think not. We think that the extreme discount for ISOL is from three factors, none of which are going to be permanent depressors of the stock:
1. It's a newly-formed company after Laguna Brands went on a shopping spree. So it is under the radar compared to Aurora and Canopy which are household names in the industry.
2. Some people may be waiting to see a full set of (unaudited) financial statements instead of relying on a press release to see if profits truly mean profits instead of something else (EBITDA or gross margins or comprehensive income). They may find it too good to be true that a cannabis company can have such a strong start at this early stage.
3. With all the acquisitions, the share count has risen substantially to 173 million over the last few months. Even though these acquisitions were very smart, it still has created a lot of cheap paper that needs to be absorbed by the market. That's okay, we absorbed more of that cheap paper upon today's news.
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
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ISOL was up on a follow up announcement of Q1 results that confirmed profitability for the quarter:
"VANCOUVER, BC / ACCESSWIRE / July 26, 2017 / Isodiol International Inc. (CSE: ISOL) (OTC PINK: LAGBF) (Frankfurt: LB6A) (the "Company" or "Isodiol") a global cannabis innovator, specializing in the development of pharmaceutical and consumer products, announces the operational numbers of its wholly-owned subsidiary for the period from April 1, 2017 to June 30, 2017. Iso International LLC recorded unaudited fiscal Q1 profits of $897,596 based on revenues of $4,919,693 CAD.
Marcos Agramont CEO of Isodiol stated, "Demonstrating Q1 profitability is a major milestone for our company and our investors. The cannabis industry on a whole will be legitimized by demonstrating successful commercialization and operating in an environment which promotes the cannabis movement. We have developed product lines and brands which will generate revenues and profitability and now we're positioned to begin exploring additional expansion opportunities. Vertical integration, expanding product distribution channels and out-of-state manufacturing and processing are all opportunities we will aggressively develop and execute."
About Isodiol International Inc.
Isodiol International, Inc. is the market leader in pharmaceutical grade cannabis compounds and the industry leader in manufacturing and development of consumer products. Isodiol's nutraceutical division is the pioneer of many firsts for Hemp-derived cannabidiol (CBD), including 99% pure crystalline isolate, micro-encapsulation, and nano technology for the highest quality consumable and topical skin care products.
Isodiol's growth strategy includes the development of over-the-counter and pharmaceutical drugs, seeking joint ventures and acquisitions to expand its portfolio of brands and subsidiaries and will aggressively continue International expansion into Latin America, Asia and Europe."
On Sunday we said that we believe that ISOL could be a $2.00 stock and figured it will be at least $1.00 by the end of the year. The following chart should provide more clarity around that. This chart compares ISOL to some of the most popular cannabis stocks trading in Canada. That is Canopy Growth Corporation (TWMJF), Aurora Cannabis Inc. (ACBFF), Aphria Inc. (APHQF), OrganiGram Holdings Inc. (OGRMF), Supreme Pharmaceuticals Inc. (SPRWF) and Emblem Corp. (EMMBF).
These are the last reported quarter results which we then annualized (multiplied by 4) to come up with their revenue and earnings multiples. We used this format because revenue is growing quickly for many of these companies and using the trailing four quarters would understate the current revenue run-rate. While this method may not be perfect and may not fairly present the investment case for each of the other companies listed, it clearly shows the investment case for ISOL. All figures are in $CAD. We took all this data from news releases or SEDAR filings manually (SEDAR is the Canadian equivalent to EDGAR) and we are human and might have made an error. So don't just take our word for it, compile this data for yourself.
ISOL has a revenue multiple of 2.6x. The next lowest multiple belongs to WEED at 25.8x, nearly ten times higher. The rest of the companies have revenue multiples above 40. ACB has the thinnest of profit margins but the rest have negative earnings while ISOL has an earnings multiple of 14.5x when Q1's great result is annualized. So while the other cannabis companies trade at very aggressive multiples because of the growing medical marijuana industry and movement towards legalized recreational use, ISOL is trading at valuations similar to a boring, old retail stock.
ISOL has similar revenue and higher profits to ACB and APH last quarter but it trades at barely over 5% of their market caps. Put another way, ISOL has to move 15-20 times higher, or $4.50 to $6.00, to align with those companies on a revenue multiple and will still operate at a higher profit level.
Does the market wish to give the major MMPR growers like WEED and ACB a premium versus something like ISOL which concentrates on CBD and cannabis-infused products? Perhaps. But is that premium justified at 10-20x? We think not. We think that the extreme discount for ISOL is from three factors, none of which are going to be permanent depressors of the stock:
1. It's a newly-formed company after Laguna Brands went on a shopping spree. So it is under the radar compared to Aurora and Canopy which are household names in the industry.
2. Some people may be waiting to see a full set of (unaudited) financial statements instead of relying on a press release to see if profits truly mean profits instead of something else (EBITDA or gross margins or comprehensive income). They may find it too good to be true that a cannabis company can have such a strong start at this early stage.
3. With all the acquisitions, the share count has risen substantially to 173 million over the last few months. Even though these acquisitions were very smart, it still has created a lot of cheap paper that needs to be absorbed by the market. That's okay, we absorbed more of that cheap paper upon today's news.
Disclosure: We are long ISOL on the Canadian Stock Exchange
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Click Here for Microcap Millionaires Free Video: How To Score Up To 1,400% Gains With "Weed Stocks" in 2017
Learn How to Maximize the Dividend Return of Your Portfolio With Access to a List of the Top 100 Dividend Stocks
Additional benefits include:
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If you're interested in trading options, both calls and puts on certain large cap stocks, binaryoptionsprosignals.com sends real-time trading signals on a select group of stocks, forex pairs and commodities. The site claims over 70% accuracy thanks to a combination of trading algorithms and technological advances which allow it to produce signals through predictive software.
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TraderReview: Professional Daily Market Strategy Newsletter
Learn to trade stocks, options, commodities and forex profitably with Trader Review's secret charting methodology with instant portfolio access to their picks.
Z Code System: For something a little different
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
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