Things are finally looking up for shares of Hemp Inc (OTCMKTS: HEMP) after being stuck under the $.03 a share level since February. As one of the first pot stocks on the OTC Markets, Hemp has yet to regain its former glory. Back in 2014, shares of Hemp traded as high as $3.50 a share. With its loyal shareholder base nursing heavy losses, the days of a comeback are long overdue. Taking a closer look, there’s reason for shareholders to be optimistic that the worst is behind the company and much better days are ahead.
HEMP Inc Background
First up, unless you were born on Mars, you are no doubt familiar with Hemp Inc, but here’s a quick refresher. Hemp Inc is a global leader in the industrial hemp industry with bi-coastal processing centers including the largest multipurpose industrial hemp processing facility in the western hemisphere (in Spring Hope, North Carolina), a 4,500 hemp-growing and processing eco-village aggressively being built on 500 of those acres in Golden Valley, Arizona called Veteran Village Kins Community (to serve the needs of the American veterans) and one of the most sophisticated harvesting and post-processing facilities in Medford, Oregon.
Big jump in sales in 2018
The biggest overhang on the company has been its lack of progress on the revenue front. However, in 2018, the company put those concerns to bed. Overall, sales increased from $107,002 in 2017 to $1,960,754 in sales for 2018, showing a quarter-on-quarter increase for the year of 2018. Sales by quarter for the year were $96,498 for the 1stquarter; $108,100 in sales for the 2ndquarter; and $159,750 sales in for the 3rdquarter, with a remarkable $1,596,406 for the 4thquarter. Operating expenses rose only 72% percent from the previous year. Full-year sales for 2018 of $1,960,754 represented an increase of over 1,800% over the previous year. CEO Bruce Perlowin said:
“This steady increase is indicative of the industry’s growth. The industrial hemp industry and Hemp, Inc.’s foothold in that industry continues to grow. We’ve fundamentally changed how we run our company to focus on building a hemp infrastructure since none existed previously. We’ve invested heavily to build this infrastructure, which currently consists of 9 divisions, as you’ll read below. I liken Hemp, Inc.’s business model to that of the Amazon.com model where today the richest man in the world plowed all their operating capital and profits back into building the infrastructure. We, instinctively, have been following that same path. This is a business strategy that obviously works very well.”
Vertically-integrated Hemp producer
We understood that shareholders are frustrated by the weak share price, but Hemp has built perhaps the only vertically-integrated Hemp company in the sector. Starting with its multi-purpose industrial hemp processing facility and milling operation in Spring Hope, North Carolina, Hemp Inc owns the largest “industrial hemp processing center” in the western hemisphere and has grown to become one of the pre-eminent centers of the industrial hemp industry. The 85,000 square foot facility sits on a 9-acre campus.
In addition to the company’s industrial hemp processing facility in Spring Hope, North Carolina, Hemp, Inc. also has one of the most sophisticated local processing centers (LPC) in Medford, Oregon which focuses on hemp harvesting, drying, curing, trimming, bagging, storing, and in some cases selling high CBD hemp for the local farmers and for our own hemp grows in that area, and post-processing for the CBD industry.
Hemp, Inc. also has 4,500 acres of land in Golden Valley, Arizona. Out of the 4,500 acres of land, 500 acres have currently been designated for the Veteran Village Kins Community (VVKC). Hemp, Inc. is preparing 300 of those 500 acres for hemp cultivation. The company aims to boost the economies of these towns by offering affordable hemp processing services, which incentivizes local growers to add hemp to their crop rotation. The company is continuing to scout new locations for local processing centers in Florida, Puerto Rico, West Virginia, Kentucky, Pennsylvania, New Hampshire, and several other states.
Currently trading with a market cap of $21 million, HEMP Inc looks to have turned a corner and brighter days are ahead. We believe that investors are going to start bottom-picking in names like HEMP that have underperformed the market rather than keep chasing stocks like CGC, TLRY, and CRON. In our opinion, the risk/reward on HEMP is a much better opportunity at current levels.
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Disclosure: We have no position in HEMP and have not been compensated for this article.