Rubicon Organics has a huge upside, Haywood says

Its second quarter numbers are in the books and Haywood analyst Neil Gilmer remains more than bullish on Rubicon Organics (Rubicon Organics Stock Quote, Chart, News, Analysts, Financials TSXV:ROMJ).

On August 16, ROMJ reported its Q2, 2023 results. The company posted Adjusted EBITDA of $1.77-million on revenue of $11.28-million, a topline that was up 28 per cent over the same period last year.

“I’m pleased to share that Rubicon Organics has achieved another record quarter of net revenue, a 28% increase year-on-year, delivering our fifth consecutive quarter of positive Adjusted EBITDA and fourth consecutive quarter of positive operating cashflow,” said CFO and interim CEO Margaret Brodie. “Our focus remains on further establishing a leading presence in the premium cannabis market and, through extensive due diligence, to work with high-quality partners to complement our own premium production to achieve our long term-strategy. We expect to see the ramping up of supply from these partnerships to leverage the strong demand of our brands beginning in Q4 2023.”

Gilmer characterized the quarter.

“Rubicon reported Q2/23 net revenue of $11.3M, a YoY increase of 28%, above our estimate of $10.6M,” he noted. Adjusted gross profit before fair value adjustments was $4.6M, representing a margin of 40.8% below our expectations for a margin of 41.6%. The Company reported Adjusted EBITDA of $1.8M (15.7% margin) compared to our forecast for EBITDA of $1.5M (14.3% margin). Cash flow from operations was positive $2.4M while free cash flow was positive $1.7M. The Company finished the period with $9.3M in cash and $10.1M in total debt, of which only $0.8M id due in the next 12 months.”

In a research update to clients August 17, Gilmer maintained his “Buy” rating and one-year price target if $1.75 on ROMJ, implying a return of 250 per cent at the time of publication.

Gilmer believes Rubicon will post EBITDA of $6.1-million on revenue of $43.1-million in fiscal 2023. He expects those numbers will improve to EBITDA of $11.2-million on a topline of $54.4-million in 2024.