vff: Village Farms: Buy, Sell, or Hold?

Founded in 1989, the Canadian-headquartered Village Farms International (VFF) is a leading North American greenhouse grower of large-scale agriculture, with crops that include premium quality tomatoes, bell peppers and cucumbers.

VFF made its debut into cannabis a few years ago when it entered into a joint partnership with Emerald Health Therapeutics. Initially each company owned 50% of the JV known as Pure Sunfarms. In September, VFF acquired the remaining ownership of Pure Sunfarms from Emerald Health Therapeutics. Pure Sunfarms is a Canadian firm that runs one of the world’s largest cannabis growing operations.

On Nov. 23, VFF announced that Pure Sunfarms received a Cannabis Research License from Health Canada, a federal agency, to conduct human administration trials for sensory evaluation of cannabis at its facility in British Columbia. The company also debuted its product line in Hong Kong through a luxury gift set featuring CBD-infused chocolates, bath salts, and tea bags.

Earlier in the third quarter, the company invested in Australia-based Altum International Pty Ltd, with the aim of expanding in the Asia-Pacific market. It also invested in DutchCanGrow, a Netherlands-based cannabis enterprise, with the goal of waiting for the Dutch government to grant licenses to local cannabis growers.

During its Q3 earnings call, CEO Mike DiGiglio stated VFF is ready to dominate the Canadian market by supplying “as much as 30% to 35% of the total Canadian cannabis flower market … in addition to being a leading brand in excess of 20% of the retail channel.”

In the U.S., VFF’s focus is the hemp-derived CBD market – the company has not announced plans to sail through the constellation of states where cannabis products can be legally sold. Working in a joint venture called Village Fields Hemp USA LLC, the company is active in outdoor hemp cultivation and CBD extraction, with operations rooted in its 5.7 million-square-foot production area in Texas.

Here is how our proprietary POWR Ratings system evaluates VFF:

Trade Grade: A

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VFF is currently trading at $9.53, closer to its 52-week high of $9.82 and far removed from its 52-week low of $2.07. The VFF stock took off this month with news of the Pure Sunfarms acquisition – it began the month trading at $5.17.

In its report for Q3 activity ending Sept. 30, the company reported a quarterly 75% net sales increase of 75% to C$22.6 million and a gross profit increase of 81% to C$7.8 million. Q3 net income increased 200% to C$3.2 million while adjusted EBITDA increased 125% to C$5.6 million.

Buy & Hold Grade: A

The new vibrancy that VFF enjoys by way of PureFarms has made the stock an attention-grabber in a short period – the 52-week low of $2.07 seems like ancient history. The company’s focus on the Asia-Pacific market, where CBD products are still relatively new to consumers, is putting it in the right place at the right time.

Peer Grade: A

VFF is a relative newcomer to the cannabis stock sector. While it is gaining notice, long it can maintain its robust stock performance remains to be seen – especially if it can make a splash in the U.S. market. But at the moment, it is making a strong impression.

Industry Rank: B

Agriculture ranks #48 out of 123 stock categories and, for the moment, VFF is not rated among the companies in this category. The average POWR rating for the agricultural category is B.

Overall POWR Rating:

VFF is rated “Buy” based on the muscularity of its entrance into the cannabis sector and its eagerness to expand operations across both the Atlantic and the Pacific while staking out territory in the Canadian market. It possesses solid growth prospects as determined by the four components of our overall POWR Ratings.

Bottom Line

VFF is poised to close 2020 on a high note, and the company could go further if the incoming Biden Administration and the next Congress can find a way to rewrite federal laws prohibiting marijuana commerce.

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VFF shares were trading at $10.20 per share on Wednesday afternoon, up $0.60 (+6.25%). Year-to-date, VFF has gained 63.72%, versus a 14.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series. He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...