Börse Express – The new cannabis stock outperforms Aurora Cannabis and Canopy Growth

Major Canadian stocks of cannabis suffered a setback. Aurora Cannabis (WKN: A12GS7) had a very bad start in its first week of trading on the New York Stock Exchange. Cover growth (WKN: A140QA) lost more than 25% of its market capitalization last week.

But there is a new stock of cannabis that has weathered the storm. The performance of this stock beats Aurora, Canopy and almost all cannabis stocks this year.

So what is it? House of origin (INS: A2DH0P). The shares were traded on October 22 on the Canadian Stock Exchange (CSE) and over the counter in the United States. Only Origin House is not completely new.

Under the new flag

Until last week, Origin House was still known as CannaRoyalty. What's behind the name change? Well, the company wanted a new visual identity that clearly signaled the goal of becoming an "outstanding global cannabis brand".

CannaRoyalty has nicknamed the origin of the company. The current business model focused on the streaming of cannabis royalties, in which the company was funding marijuana companies in exchange for a percentage of agricultural production or its participation. But the company's strategy has evolved over time.

Origin House is now focusing primarily on the distribution of cannabis products in California. The US State is the largest legal marijuana market in the world. And Origin House is # 1 in the cannabis market in California.

The company currently has more than 50 partner brands. It sells more than 130 cannabis brand products to about 70% of California outlets. Origin House also owns and markets several own brands.

However, even though Origin House is a major player on the huge California market, Canada has its foot in the door. In September, the company announced plans to acquire 180 Smoke, a leading Vape dealer with 26 stores and a strong online presence.

Good prospects

New name, new logo and new stock symbol: Origin House is waiting for the right time to start. Chief Executive Officer Marc Lustig said the first half of 2018 in California was a bit difficult due to the chaotic launch of the state-regulated recreational cannabis market. But now, Lustig finds the situation "pretty good".

He was convinced that Origin House would be profitable in 2019. Technically, the company made a profit in the second quarter. However, the positive result results from gains on the sale of badets. But Origin House now seems to be on the road to sustainable profitability.

At least one badyst thinks that Origin House will generate nearly $ 200 million next year and $ 425 million by 2020, or about $ 325 million. Origin House has no sales forecasts yet, but the badyst's estimates should be viable.

Lustig said the company currently generates about 70% of its sales with sales and 30% with its own brands. Its goal is to bring the income distribution back to near 50:50 by the beginning of 2019. Origin House plans to achieve this by launching a new brand a month.

This is part of the three-phase long-term strategy of Origin House. First, they want to expand their base as the leading cannabis vendor in California. The second phase is to leverage data from their sales activities to further accelerate the creation of better performing brands and to promote existing brands in the California market.

Phase three of Origin House's strategy could be even more profitable in the long run. The company plans to reiterate its success in California in other fast-growing markets. The purchase of 180 Smoke is an example of this strategy. Lustig suggested that Origin House could expand in the future in the neighboring US state of Nevada. It is determined that the company becomes disciplined rather than entering new markets without a solid foundation.

Better than the big players?

As I said, Origin House easily beats the performance of most other cannabis stocks, including two of the most important: Canopy and Aurora. But is Origin House a better long-term investment than the big players in the sector? I think so

The investment company Beacon Securities believes that distributors and retailers could be the first league of cannabis brands. I agree, especially with the US market. Origin House is well positioned to crown some of its own brands in addition to its partner brands.

Canopy Growth, Aurora Cannabis and others are closely related when it comes to working in the United States. But not originally House. It should be recalled that the United States accounts for 85% of the total world market for cannabis. Even with Canada 's recently launched market for legalized over – the – counter marijuana and the licensed medicinal cannabis market elsewhere, by 2022, the United States will still generate nearly three – quarters of cannabis sales.

Then there is evaluation. Even after the recent brutal falls, Canopy's market capitalization is close to $ 8 billion, while Aurora's market capitalization is close to $ 7 billion. Origin House's market capitalization is close to $ 300 million. With a potential revenue of $ 250 million by 2020, the valuation of the security based on its realistic growth potential looks very attractive in the short term. You can not say the same about large stocks of cannabis.

In August, I said CannaRoyalty was the best cannabis stock, somewhat unknown. But this is no longer true – now this honor is Origin House.

The Motley Fool recommends the actions of the home of origin. Keith Speights does not own any of the listed shares.

This article was published on 28.10.2018 on Fool.com. It has been translated so that our German readers can participate in the discussion.