VRUS stock has been a painful investment this year. Shares have been on a steady downtrend since the COVID-19 pandemic hit. This is not due to poor business performance, but rather an endless dilution from convertible notes. Noteholders have been converting and dumping shares.
However, the tide looks to be turning for VRUS stock. The recent earnings report and comments from management signal that the worse is over for shareholders. As we take a closer look at VRUS stock, the risk/reward dynamics are perhaps the best we see on the OTC Markets at the current time. As you can see from the chart below, we see a rounding bottom and limited downside.
First up, here’s a little background info for those not familiar with VRUS stock. Verus is a global, emerging multi-line consumer packaged goods (CPG) company developing branded product lines in the U.S. and on a global basis. The Company trades on the OTC market (OTCQB: VRUS). The company’s divisions include Big League Foods, the newly acquired Eliot’s Nut Butters, and Pachyderm Labs.
VRUS stock has a current market cap of only $10 million, yet look at the numbers the company just posted for Q3.
- Revenue achieved an all-time 3rd quarter record, reaching $6.2 million, an increase of 78% over the $3.5 million reported in Q3 2019;
- Q3 revenue marked the Company’s 9th consecutive quarter of double- or triple-digit year-over-year revenue growth;
- The global pandemic continued to impact suppliers, customers, and transport during Q3, but did show gradual improvement during the quarter;
- Gross profit margin was 14.8%, 60 basis points higher than the 14.2% reported in Q3 2019;
- Operating expenses of $1.2 million were $0.6 million lower than the $1.8 million reported in Q3 2019, primarily due to the completion of the CEO’s stock-based compensation program during Q2 2020, resulting in no related stock-based compensation expense for Q3 2020, partially offset by a net increase in other operating expenses to support the 78% revenue increase;
- Operating loss of $0.3 million improved significantly, declining from $1.3 million in Q3 2019, a 79% year-over-year improvement;
- Net loss was $1.3 million for Q3 2020 compared to a net loss of $1.4 million for Q3 2019. The Company experienced a one-time increase in interest expense of $0.8 million related to the conversion of certain convertible notes payable during Q3 2020; and
- Stockholders’ equity achieved a new record at $0.6 million, which is significantly higher than the stockholders’ deficit of $0.9 million reported at fiscal year-end October 31, 2019.
Highlights For The Remainder Of 2020
Here is what VRUS stock plans on accomplishing before the end of the year.
- The Big League Foods division expects to have products in four chains, T.J. Maxx, Marshalls, Meijer, and Big Five Sporting Goods in October 2020;
- The newly acquired Eliot’s Nut Butters is already preparing for a product line expansion;
- National Hockey League candy products are in development, with an in-store target to coincide with the start of the NHL season during December 2020;
- The Pachyderm Labs division is now 44 products strong with an initial wholesale distribution launch through 20 distribution warehouses across 6 states;
- Verus reduced its convertible debt by approximately 50% from approximately $1.3 million at the end of Q3 2020 to approximately $0.6 million as of September 18, 2020; and
- The Company completed its authorized equity funding under its effective S-1 with White Lion Capital.
The reason VRUS stock is depressed is because of dilution. Here the company is planning to fix this.
“We took a series of actions designed to immediately reduce our cash burn, increase our working capital, and put us in a position to gain commercial credit. Our goal is to end our reliance on the kind of convertible debt treadmill that left us with a chronic shortage of working capital in the past. We have the best product line in our history and believe that our way back will be paved via increased growth, so that is our goal through the remainder of 2020.”
Reasons To Be Bullish On VRUS Stock
- The conference call was good. CEO Anshu Bhatnagar sounded confident and you can tell he is embarrassed by the share performance and wants to do well for his shareholders.
- There remains just $600k in convertible notes, down from $1.3 million.
- VRUS can raise up to $5 million via an S-1 with White Lion Capital.
- The company’s new Pachyderm Labs cannabidiol CBD products are in approximately 500 locations, with 10,000 more locations identified for early 2021.
- VRUS stock is a fully-reporting QB.
- Revenues growing 78% year-over-year to $6.2 million in just the third quarter alone, yet its market cap is just $10 million.
- How many OTC stocks are working with MLB, NHL, and possibly soon – the NBA?
- VRUS stock has a history of price spikes. Shares look to be gearing up for another big move higher.
So you’re telling me I can own stock in a company that just did over $6million in revenue in one Qtr during a global pandemic for under .002? $VRUS
— rumplestiltskin (@rumpsand2gold) September 22, 2020
VRUS stock is a prime turnaround play and making a comeback on the OTC Markets. Once the company clears the last of the convertible notes from its balance sheets, VRUS stock is a prime stock to uplist to NASDAQ or the NYSE. Just look at the revenue growth VRUS stock has shown since 2016.
2020 will be another record year with revenues on track to come in around $23 million. We don’t expect shares to remain this cheap for much longer.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in OTCMKTS:VRUS or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.