Valens Groworks Corp (CNSX: VGW) is up by more than 100% for the year. The fine run does not come as a surprise given that the company has evolved to become one of the biggest players in the cannabis sector. A 240,000kg dried cannabis production capacity is one of the reasons why the company has taken the industry by storm.
CNSX: VGW Share Price Analysis
The signing of cannabis and hemp extraction agreements with some of the biggest names in the industry such as Canopy Growth Corp (NYSE: CGC) and Tilray Inc (NASDAQ: TLRY) also underscores the company’s credentials in the industry.
The company has since been able to close a big financing deal and in the process strengthen its balance sheet with as much as $43 million. After a pivotal 2018 that saw Valens GroWorks achieve significant milestones, it does not come as a surprise that the stock has started racing higher.
Valens Groworks is currently flirting with record highs as investor’s eye a piece of the company’s pie. A breach of the $2.40 critical resistance level has opened the door for the stock to continue powering high in line with the bullish momentum in the overall cannabis sector.
As it stands, the stock should continue powering high with pullbacks acting as support from where the stock is likely to continue climbing the cannabis ladder.
What does Valens Groworks Do?
Valens Groworks casts itself as a biotechnology company engaged in the research and development of cannabis and cannabis-related products. The company also holds a license for the cultivation and production of cannabis oil under the Cannabis Act.
Why is Valens GroWorks Flying Higher?
Valens GroWorks securing the spot to become the largest third-party extraction company with a capacity of 240,000kg of cannabis explains the high valuation it continues to enjoy in the market. As it stands, the company remains well positioned to address customer demand given its robust marijuana extracting services.
According to the Chief Executive Officer Tyler Robson, the primary focus is to build a footprint capable of meeting the demands of the global cannabis marketplace.
“With edibles and concentrates becoming available later this year in Canada, we must be ready for a shift in consumer demand and in turn be flexible and scalable in our offerings for our clients to meet that demand,” stated Mr. Robson.
In the recent past, the company has signed multi-year cannabis and hemp extraction agreement with Tilray, all but affirming its growing reputation in the business. Under the terms of the agreement, the company is to extract a minimum of 15,000 kg of dried cannabis for Tilray. A partnership with Tilray should go a long way in strengthening the company’s emerging product offering.
In addition to the Tilray deal, Valens GroWorks has also entered into a multiyear extraction services contract with The Green Organic Dutchman Holdings Company. Just as is the case with the Tilray’s deal, the company is to process, extract and purify TGOD’s cannabis and hemp biomass at a fee.
The wave of extraction deals that the company has signed in the recent past aligns perfectly with its 2019 goals. The company is eyeing additional extraction and product development contracts as it looks to strengthen its pipeline in pursuit of new streams of revenues. Valens GroWorks is also planning to expand its offerings into the cannabis-infused beverages, edibles and concentrates markets, as part of its growth strategy.
Solid Balance Sheet
Expanding into new markets as well as product line should not be a challenge, given that the company’s balance sheet has received a significant boost. Valens GroWorks is fresh from closing a $43.13 million bought deal financing.
With the new finances, the company remains well positioned to increase its extraction capacity at the Kelowna facility. Plans are also underway to build out the recently acquired adjacent property to strengthen the processing capacity further.
Valens GroWorks has positioned itself for robust growth given the investments it has made on enhancing its Cannabis extraction capacity. Deals with industry giants such as Canopy Growth and Tilray affirm the company’s growth prospects at a time when demand for cannabis products is on the rise.
For investors looking for a high risk-reward then Valens GroWorks should be top on the list given its tremendous potential as a cannabis extraction services provider.
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Disclosure: We have no position in CNSX: VGW and have not been compensated for this article.