No need to grow cannabis to develop a profitable company
With the cannabis market growing so fast, we will show businesses that don’t have contact with the cannabis plant. Even though they haven’t a contact with the plant, they can become vital and necessary to the success of the pot industry. In fact they are auxiliary companies.
Last year Canada became the first industrial country that legalized marijuana and many states in the U.S. and other foreign countries approved the use of medical pot. Once the door has been opened, billions of dollars in legal money are flowing into the marijuana business.
These kinds of companies used to live unnoticed for years, but since the legalization became real, they have a great opportunity to shine bright with the weed industry legal in Canada. It is not only a question of being legal; it is a question of quit being taboo too. Probably, the best example of these kinds of companies is KushCo Holdings.
KushCo is well known for producing child-and tamper-resistance packaging solutions for about 5.000 growers from all over the world. It is a remarkable business! If a grower wants to sell its products to dispensaries and pharmacies, their products must respect federal, state and local laws. And KushCo provides these companies the packaging solutions needed according to legal standards.
But KushCo goes further. Its acquisition of Zack Darling Creative Associates in July 2018, meant access to a new creative agency that could be used to become a one-stop-shop for solutions related to branding. KushCo can get packaging solution that obeys the laws; but it also can help growers highlight with creative branding option in a market that is continuously growing.
Provided Canada’s Parliament approves the new consumption possibilities by this summer, which includes vaping, KushCo can see how its vaporizer sales increase during the second half of 2019. Vaporizer sales won’t be a very important part of the company’s long-term business, there is no doubt it will be welcomed in the near term.
Moreover, KushCo has acquired Summit Innovations, a company that closed in early May. Summit is a company that produces hydrocarbon gases. And remember that hydrocarbon gases are necessary to convert cannabis plants into oils. And oils have a very high margin compared to dried flowers.
In the U.S. those states that legalized the consumption of cannabis, have seen how the prices went down just a little bit after the legalization. This fact happened because growers oversupplied the market and this caused the fall in prices, and therefore, the margins. This is the reason why many growers are looking for alternative products, such as oils, that have higher margins and, so far, no pressure in the prices.
KushCo is now a company that is at the top of major cannabis trends in 2019. After the company announced sales growth of 177% in fiscal 2018 to $52.1 million, KushCo has forecasted $110 million to $120 million in sales for fiscal 2019. The average represents 121% year-over-year sales growth. Provided margins improve in 2019, KushCo can expect profit ranging from $30 million to $40 million. If it is true that these numbers don’t mean a substantial profit for 2019, it really means that KushCo has found its profitable niche market. Because of these questions, KushCo Holdings represents a great choice to invest in pot stock.
Note. The Motley Fool recommends KushCo Holdings and OrganiGram Holdings. The Motley Fool has a disclosure policy.
Fool Disclosure Policy
Here at The Motley Fool, when it comes to matters of money, we believe in transparency and accountability. Day in and day out, we dedicate ourselves to delivering responsible investing ideas and sound financial education. That’s why, when it comes to talking about stocks, we think it’s important that you know exactly where we’re coming from. With this in mind, we have developed a company-wide disclosure policy to guide our business and communications. We call it Fool Disclosure. We invite you to take some time to read through it, and hope it helps inform your experience here in Fooldom.
