A well-chosen small-cap stock can generate decisive gains. Indeed, highly competitive companies in rapidly expanding markets can experience exponential growth and wealth.
In this respect, few markets are expected to grow faster than the global cannabis market. And in this booming industry, no segment is as popular as cannabidiol (CBD). Read on to find out more about CBD, as well as the company best positioned to take advantage of explosive global growth in the coming years.
The impending CBD boom
CBD is one of more than 100 chemical cannabinoids found in the cannabis plant. People use CBD to treat a variety of ailments. Apart from GW Pharmaceuticals"Medication against CBD-based epilepsy, these medical benefits are not proven, according to the US Food and Drug Administration (FDA). However, unlike tetrahydrocannabinol (THC) – the cannabinoid associated with the intoxicating effect of marijuana – CBD is not psychoactive and therefore does not cause emotion, which makes it more attractive.
Partly because of the adoption of the US Farm Bill in December – which legalized hemp-derived CBD in all 50 states – the sector is expected to experience explosive growth. CBD's global sales could grow by 147 percent a year to $ 22 billion by 2022, according to the Brightfield Group.
The market leader
No company may be better placed to take advantage of the rapid growth of CBD than Charlotte Web Holdings (NASDAQOTH: CWBHF).
Based in Boulder, Colorado, Charlotte's Web is the world's leading brand of CBD hemp-based market share. By the end of 2018, the company's products were in nearly 3,700 outlets. Now that the Farm Bill is in the books, this number is likely to increase rapidly.
In particular, Charlotte's Web produces its own hemp – its 2018 crop produced 675,000 pounds of raw hemp – thus ensuring a steady supply. It also acts as its own distributor to retailers. The company increased its retail presence by 80% in 2018. It also has a booming consumer direct electronic commerce business, which recorded a 58% increase in sales in the fourth quarter.
In addition, Charlotte's Web – unlike many cannabis producing companies – is already profitable. The focus on CBD high-margin oils and topical products has allowed it to experience not only rapid sales growth, but also strong earnings growth. In 2018, the company's revenues increased 74% to $ 69.5 million, while gross profit rose 75% to $ 52.3 million. And its net profit – adjusted to exclude IPO costs – jumped 76% to $ 13.1 million.
Potential for massive growth
Better yet, Charlotte's web revenue growth is expected to accelerate from 2018 levels in the coming years. Wall Street expects the company's sales to increase by 119 percent to $ 152 million in 2019. Analysts predict an additional 106 percent increase in sales to $ 313 million in 2020 .
Best of all, Charlotte's current market capitalization of $ 1.8 billion probably underestimates its real growth potential as a leader in the global CBD market that is expected to exceed $ 20 billion by now 2022. Investors who buy stocks today could very well make good gains in the next few years.