Robust revenue growth at the back of triple-digit growth are some of the developments that affirm why it is time to buy Verus International Inc (OTCMKTS:VRUS) on the dip. The company bouncing back to profitability marks yet another important milestone affirming long-term prospects.
A pullback from one-year highs presents an opportunity to buy the stock on a discount as improving underlying fundamentals continue to strengthen market sentiments. As it stands, the $0.02 mark is a crucial support level from where Verus International remains well supported for a bounce back.
Considering the long term ascending trend line, the stock looks set to make a run for the $0.03 level on stabilizing above the $0.02 level. A rally followed by a close above the $0.03 level should pave the way for the stock to register a new highs in continuation of the bullish trend. Conversely, failure to stabilize above the $0.02 level could pave the way for short sellers to push the stock to the $0.01 handle, the next substantial support level.
In our view, Verus International has what it takes to continue edging higher as investors react to a solid third-quarter earnings report affirming growth in the core business.
Verus International is a company focused on consumer food products. The company distributes its products in key markets of North Africa, the Middle East as well as Asia. Its product pipeline is mostly made up of frozen foods, meat as well as poultry, seafood and vegetables. It also distributes consumer-packaged goods such as cosmetics and fragrances.
Robust Revenue Growth
One of the reasons why we remain up bit about Verus International prospects in the market has to do with the delivery of impressive financial results that affirm improvements on operational efficiency. For the three months ended July 31, 2019, the consumer goods focused company generated record revenues amounting to $3.48 million, representing a 154% year over year increase.
Net income for the nine months ended July 31, 2019, totaled $469,000 compared to a net loss of -$1.5 million reported a year earlier. According to the Chief Executive Officer, Anshu Bhatnagar, the financial results underscore growth potential of the core business
Revenue growth looks set to continue, as Verus International currently has the largest funded backlog in history, amounting to $34 million. Unfunded backlog is also on the rise setting the stage for robust organic growth going forward.
“So, we are confident that we can ramp up that business in the future. We are in the enviable position of having more backlog than our current capital resources can fulfil, so getting working capital at favorable rates is a top priority,” said Mr. Bhatnagar.
The current revenue base is also on the cusp of receiving a significant boost as a number of retailers show strong interest in carrying the company’s MLB branded candy and ice cream. The company is also pursuing another credit line as it seeks to expand its domestic business.
Solid financial results is not the only catalysts likely to fuel Verus International rally after the recent pullback. The acquisition of a UAE-based French fry operation has once again underscored push for inorganic growth.
The acquisition of assets, of an established supplier, should strengthen the company’s revenue base, especially in the Middle East. Verus International expects the acquisition to start contributing revenues within 30 days, given the current sales relationships. The acquisition underscores Verus International ambitions of concentrating in high margin branded products market, as a way of accelerating growth in the bottom line.
The acquisition comes hot on the heels of the company securing a $13.5 million credit insurance from Euler Hermes. The insurance coverage should go a long way in protecting Verus International from non-payments by end customers. It will also make it easier for the company to extend credit to current accounts as well as pursue new and larger customers.
Verus International has had a good run in 2019. While the stock has pulled lower in recent weeks, the pullback in our view presents a buying opportunity. Revenue growth, narrowing net loss as well as expansion in international and domestic markets are some of the catalysts likely to cause the stock to reach new highs.
As it stands, the pullback presents an opportunity for long-term investors to pick up cheap shares.
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Disclosure: We have no position in OTCMKTS:VRUS and have not been compensated for this article.