Back on August 23, we published this piece on Amfil Technologies Inc (OTCMKTS:AMFE).
At the time, the company was trading for around $0.17 a share, having run up to the tune of more than 800% since we initially highlighted the stock as being one to watch.
We suggested, however, that despite this dramatic appreciation, there was still plenty of room for growth near-term.
Specifically, we highlighted some financials that was set for release during the couple of months subsequent to our analysis being published as potentially serving to compound the overarching go upside momentum and to get the stock running into the end of the year.
These financials hit press at the start of this week and, so far, market response to the numbers has been pretty subdued. We expect this muted response to only last a few days and, as we head into the close of October, we expect this company will start to run and, in doing so, resume its 2017 uptrend.
As things stand, Amfil goes for around $0.18 a share – essentially flat on the price at which the company was trading during our previous coverage.
So what did we learn from the financials?
Well, to put it simply, we learned that this company is growing at an incredible rate. During the fiscal first quarter of 2018, Amfil recorded revenues of $5.9 million – up from the $28,000 recorded during the same period in 2017. That’s a more than 20,000% gain in 12 months. We also learned that gross profit came in at $1.04 million and Amfil recorded a net income of $114000. Cash on hand as of September 30 came in at $297,000 while inventory and total assets were recorded at $4.28 million and $6.73 million respectively.
Additionally, public float was recorded at 285 million shares, while common shares outstanding came in at 418 million. The authorized share count has been reduced from 900 billion to 600 million during the 12 months to the end of the period in question.
What all this means, then, is this company has grown exactly in line with our expectations year to date. We suggested earlier this year that its aggressive growth strategy could be incredibly effective and that the only thing that would limit the upside would be if management was unable to keep control of expansion expense in line with strategic execution. In other words, if the expansion came at the cost of a large capital requirement (perhaps more accurately, an unsustainable capital requirement) then it might translate to some dilution for the company and the shareholders.
As it turns out, and as illustrated by these financials, the company is growing but it is very much able to support its own growth and to generate a net income at the same time. It’s very rare for companies of this size and at this end of the sector to be able to say that.
So what is next?
For those new to this company, Amfil is a sort of holding company for a variety of different business types and brands in Canada. It’s primary subsidiary, right now, however, is called Snakes and Lattes entities this subsidiary that is driving the growth as exemplified by the numbers discussed above.
As an ongoing strategic focus, the company is trying to franchise this brand while also opening fresh centrally operated locations in Canada. There is a midtown Toronto location set to open before the end of the year and this is a major catalyst for Amfil near term.
We would also like to see some numbers that demonstrate or offer some insight into the potential demand for the franchise locations as supportive of the company’s expectations that it should be able to amplify growth with this model.
As noted above, based on both cash balance and the net income, dilution isn’t really too much of a concern right now.
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Disclosure: We have no position in AMFE and have not been compensated for this article.