Back in February, shares of micro-cap stock Earth Science Tech Inc (OTCMKTS:ETST) soared from around $0.50 a piece to $3 in a matter of days. We picked up on it midway through the run and highlighted it as being one to watch as part of this coverage. We noted that we would almost certainly see some degree of profit-taking, and in turn, a correction, but that going forward, this one might be a nice exposure to a growing industry.
Subsequent to our coverage, the company ran up to first quarter highs in and around $3.67 a share. It has since corrected, however, and has struggled to break the one-dollar mark over the last month or so. We had it on our watchlist back then and we have kept it on our radar since, in anticipation of wider markets finally taking notice of what we see as a stock with real potential. With its latest announcement, Earth Science Tech just told us that we are finally seeing said wider markets pay attention.
On June 29, Earth Science Tech announced that SeeThruEquity, a leading independent equity research and corporate access firm focused on small-cap and micro-cap public companies, had initiated coverage on the company, and had done so with a price target of $4.12.
That target represents a close to 400% premium on current pricing.
So what is going to drive this reevaluation?
Before getting to the catalysts, it’s worth us offering up a quick introduction to the company.
Earth Science Tech is a health and wellness company focusing on what it calls nutraceuticals and bioceuticals, and dietary supplements. The company packages its products and brands them as targeting a whole host of health and wellness type indications, including chronic pain, joint pain, inflammation, all that sort of thing.
In addition to nutraceuticals, Earth Science Tech is also trying to bring a variety of CBD-based products to market, and it has picked up a bit of collateral strength on the back of this link to the cannabis space over the last six months or so.
So what is going to fuel growth going forward?
Earth Science Tech has a pretty strong pipeline of products, some of which are ready to go to market as is and some of which are approaching readiness near term. These include two CBD based pharmaceuticals drugs to be launched during the first quarter of next year, new e-liquid and edible gummies from it’s newly formed subsidiary to be launched during the third quarter of this year, and three patent pending CBD based nutraceuticals to be launched by the end of the calendar year 2017.
As each of these launches materializes, the potential revenue pool increases, and we see the company drawing speculative volume on the back of each successful rollout. As highlighted by SeeThruEquity, there are also a number of strategic partnerships both in place and pending, which should help to expand the company’s distribution network as well as serve to foot the bill for a variety of fresh product development programs. Right now, the ones we’re looking at as primarily being behind an increased valuation are three existing partnerships with Karmavore Superfood, Forzagen, and Smart Medicines. Each of these brings with it a different revenue stream and allows Earth Science Tech to diversify into individual, but equally fast-growing, consumer markets in the US.
Keep in mind that this sort of growth strategy is conducive to relatively high capital necessity and, as such, we are probably going to see a raise at some point near term. Looking at the balance sheet, the company had just $44,000 on hand as of the end of March this year – nowhere near enough to fund through end 2017.
With that said, however, there’s no debt on the books and a topline increase should reduce the dilutive impact of any raise, while also boosting valuation longer term.
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Disclosure: We have no position in ETST and have not been compensated for this article.