Rubicon Organics retains Outperform rating with Raymond James

The results are looking good for Rubicon Organics (Rubicon Organics Stock Quote, Charts, News, Analysts, Financials TSXV:ROMJ), according to Raymond James analyst Rahul Sarugaser who reviewed Rubicon’s latest quarterly numbers in a client update on Wednesday. Sarugaser reiterated an “Outperform” rating on the stock, saying the company has executed very well in the hot premium cannabis space.

Rubicon Organics, a Delta, BC-based cannabis producer growing certified organic cannabis products for the Canadian medical and rec markets, released its third quarter 2022 financials on Monday, coming in with net revenue up 49 per cent year-over-year to $10.5 million and hitting its first quarter of positive net income at $2.0 million.

In her comments, CFO Margaret Brodie said Rubicon is seeing excess demand for its Simply Bare Organic and mainstream 1964 Supply Co products in the Canadian market, while the company said it expects to be operating cash flow-positive and adjusted EBITDA profitable for the full 2022 year.

“With our suite of products in market, the profitability we achieve from each premium product that we sell and the recent launch of new items such as our infused pre-rolls and the consumer reaction to the quality and price point, I remain confident that we will continue to deliver on our financial guidance,” Brodie said in a press release.

Sarugaser said it was beats all around for ROMJ in the quarter, with the $10.5 million topline coming in ahead of his estimate at $9.5 million as well as the consensus at $10.0 million, while adjusted EBITDA at $1.9 million was a material beat of Sarugaser’s negative $0.6 million as well as the Street’s negative $1.1 million. Net income at $2.0 million was also above Raymond James and the consensus both at negative $1.2 million.

Sarugaser said the royal flush of beats on revenue, EBITDA, Net Income and its first quarter of positive free cash flow is “exceedingly rare” in the cannabis sector and speaks to Rubicon’s ability to execute against its strategic plan for the year. Sarugaser also noted that the premium cannabis segment, where products are priced about 20 per cent above average, continues to outpace growth in Canada at positive 28 per cent sequentially versus 13 per cent for the broader cannabis market.

“We flag ROMJ to our clients as an exceedingly well-managed, tightly-operated, +free cash-flowing name. Full stop. And, we anticipate durability in this attractive profile: ROMJ that has built sustainable momentum behind brands in the premium cannabis segment, which is the fastest-growing, highest-margin corner of the market,” Sarugaser wrote.

With his “Outperform” rating, Sarugaser maintained a $3.00 target price, which at press time represented a one-year return of 290 per cent.