cbdMD, Inc. (YCBD) produces and distributes various cannabidiol (CBD) products; tt owns and operates the consumer hemp-based CBD brand, cbdMD, notes Faris Sleem, small cap stock expert and editor of The Bowser Report.
The company's product categories include CBD tinctures, capsules, gummies, bath bombs, topical creams, and animal treats and oils. The company distributes its products through an e-commerce website, wholesalers and various brick and mortar retailers in the United States.
CBD is the most commonly used cannabinoid found in industrial hemp. The human body can absorb it in a variety of ways, and it is legally approved by Congress as long as the products contain less than 0.3% of THC.
cbdMD is currently one of the market leaders in CBD and sells a variety of CBD products with intent to increase its offerings. The company has achieved sales of $39.7 million in the past twelve months.
These products have quickly gained popularity from their proven effectiveness and use among celebrities and athletes. The company’s market share has increased dramatically and annual sales have skyrocketed 787% since 2017.
Profits have consistently improved despite cost of revenue increasing 955% since FY17. One of the biggest catalysts is the growth of its e-commerce, direct-to-consumer sales. E-commerce sales in 3QFY20 were $8.2 million, an increase of 77% from the same period last year.
The company’s pet brand, Paw CBD, saw an increase of 64% to $1.23 million in quarterly sales. While that is definitely a high growth rate, we would like to see sales exceed at least $2 million within the next year to make a bigger contribution to total revenue.
cbdMD is trading 21% above its book value of $1.63 per share with a price-to-book ratio of 1.17. Its price-to-sales ratio of 2.7. These ratios tell us that YCBD is undervalued relative to its competition.
We believe that YCBD’s greatest advantage in the industry is its branding and numerous celebrity endorsements. The company currently has over 40 celebrity endorsements from athletes such as Bubba Watts, Lolo Jones, Daniel Cormier and more.
Although growth has been high, we want to see YCBD management continue to cut costs and focus on new product offerings to keep capturing market share.
Subscribers to The Bowser Report have been pushing us to recommend a cannabis stock for a long time. We have been waiting for the right opportunity that’s capturing the growth of the industry while also delivering on our investing criteria.
cbdMD fits that bill. The company’s outstanding financials coupled with the skyrocketing growth of the CBD industry presents a unique investment opportunity.
