Is Rubicon Organics a buy? (November, 2024)

Following the company’s third quarter results, Haywood Capital Markets analyst Neal Gilmer has maintained his “Buy” rating on Rubicon Organics (Rubicon Organics Stock Quote, Chart, News, Analysts, Financials TSXV:ROMJ).

On November 13, ROMJ reported its Q3, 2024 results. The company posted Adjusted EBITDA of $2.0-million on Net Revenue of $13.5-million, a topline that was up 15% year-over-year.

“Rubicon Organics’ financial results for Q3 2024 reflect our strong operational execution and strategic focus,” CFO Janis Risbin said. “With a record-high net revenue of $13.5 million for the quarter and $34.5 million for the nine-month period, we have demonstrated our ability to achieve growth despite the challenges in the market. Our commitment to disciplined financial management has resulted in positive adjusted EBITDA for eight out of the last nine quarters. We also anticipate finalizing our debt re-financing before the end of the year paving the way for the Company’s next five years of growth.”

Gilmer said the results were better than expected.

“Rubicon’s third quarter results were ahead of our expectations with both revenue and EBITDA exceeding our forecast. The launch into the vape category in Q2 of this year has helped drive revenue growth, along with its other product categories that continue to capture meaningful market share in the Canadian landscape. Rubicon continues to explore and leverage contract grow cultivation to drive growth and is exploring new markets into 2025. ”

In a research update to clients November 14, Gilmer maintained his “Buy” rating and price target of $1.10 on ROMJ, implying a return of 182% at the time of publication.

The analyst thinks ROMJ will post EBITDA of $4.3-million on revenue of $48.2-million in fiscal 2024. He expects those numnbers will improve to EBITDA of $6.8-million on a topline of $51.0-million in fiscal 2025.

“We use a 1.5x EV/Revenue multiple on our F2025 estimate then discount by 15%,” the analyst added. “Rubicon is currently trading at 0.6x our 2025 Revenue estimate, compared to small-cap Canadian peers at 0.5x (excl Hi/Lo).”