From time to time we look at companies trading across the cannabis sector and whether the current prices, valuation and general support for the stock (or lack thereof) makes sense. This morning, we looked at a California-based canna business trading on the pink sheets, Advantis Corp. (ADVT.OTCPK).
The company’s business description sounds promising enough:
Advantis Corporation (ADVT) is focused on helping people take control of their health and pain management needs. By creating strategic partnerships with innovative companies in the nutraceutical and alternative health care industries, Advantis is uniquely positioned to provide the guidance and support to assist in delivering products and services that address the needs of these individuals. Acquiring ownership in developing companies allows Advantis to provide consultation to improve product lines, expand distribution channels, and heighten brand value. With the healthcare and pain management sectors forecasting staggering growth, Advantis identifies and partners with those companies that possess the potential to capitalize on this trend.
The news is positive.
- Jan 29, 2018 – “Advantis Corp. Expanding into Colorado, California Nears Packaging Capacity with New Machine; Pre Orders for New Sizes Escalate Quickly”
- Jan 16, 2018 – “California Legalization for Adult Use Leads to Record Month for Advantis Corp”
- Jan 10, 2018 – “Advantis Corp. Partners with Players Network’s Green Leaf Farms and Expands Its Product Line into Nevada”
- Dec 18, 2017 – “Advantis Corp Expects Quarterly Revenue Records Throughout 2018”
- Nov 14, 2017 – “Advantis Corp. Hits Home Run with Oregon Deal”
And so on.
As I write this, the stock is up 21.6% to $0.067. With close to 1 billion shares outstanding, this translates into a market cap of about $65 million. So is the valuation warranted?
Well, as of the company’s Q317 report, filed on January 5, 2018, the company had $30K cash on hand and a book value deep underwater, ($1,274,568). No earnings. No positive cash flow. Trailing 12-month revenues of $306K which translates into a stock that is trading 214x TTM revenues.
The financial performance disclosed in the Company’s filings hardly aligns with the gushing headlines of the Company’s press releases. Something’s gotta give. To be sure, in order to catch up to the current levels of the propped up valuation, the Company is definitely going to have to post some record quarterly revenues, as forecasted in its December 18, 2017 release.
I took a closer look at that release, where the release said that “the success of 2017 is what has set the foundation for rapid growth he (CEO Cherry) expects to see in 2018” adding a quote from Cherry that “What Advantis has accomplished to this point is phenomenal.”
Either this is a classic case of information asymmetry, where the company knows something we don’t in a pretty major way, or P.T. Barnum is running the Company’s IR department. Clearly there is speculation propping the valuation up.
If I had to pick a price at which to buy this stock this morning, I think at 3x TTM sales, $0.000939 might be generous.