Green Organic Dutchman Holdings Ltd (TSX:TGOD) Is Ready to Dominate the CBD Market

Green Organic Dutchman Holdings Ltd (TSX:TGOD) has plenty of THC exposure, but can it succeed in CBD?

Young adult woman walking up the stairs with sun sport background

Image source: Getty Images

Last quarter, Green Organic Dutchman Holdings Ltd (TSX:TGOD) generated $0 in revenue, creating an $11 million loss, but I don’t think that’s the end of the road for the company. This year should prove pivotal to its future.

In 2019, Green Organic should bring 14,000 kilograms of marijuana online, which should end its streak of $0 revenue quarters to a halt. Looking ahead, the company has a one-million-square-foot facility under construction that will add an additional 140,000 kilograms of production annually.

Green Organic is about to become a dominant force for organic cannabis — a competitive edge few others can match at scale. With most Canadian consumers preferring organic cannabis, the company is well-positioned in the THC market. But what about CBD?

Green Organic is building a global CBD machine

Last year, Green Organic acquired 100% of privately-held HemPoland. It paid $7.75 million in cash, plus $7.75 million in shares, which will be distributed three years after the deal closes. In one swoop, Green Organic attained a key asset to support its goal of building a global distribution network for CBD.

“Gaining market share with CBD products now, in the EU, with over 700 locations allows TGOD to establish immediate brand awareness across all verticals including infused beverages,” said CEO Brian Athaide. “This is an accretive acquisition and gateway to Europe’s 750 million people accelerating our plan of becoming the world’s largest organic cannabis brand.”

The company has high expectations for this initiative. Built into the acquisition terms is a $12 million additional payment, but only if the business generates $32 million in EBITDA by 2021.

If this target is reached, Green Organic would be trading at 25 times the EBITDA of its CBD business alone within 24 months. Given that this business is peanuts compared to its THC initiatives, it could be a hidden value generator that most of the market is ignoring.

Once EBITDA targets are reached, Green Organic’s management anticipates investing an additional $10 million into the business to scale research and development efforts, as well as continue to solidify its valuable global distribution network. Based on these expectations, it looks like this buyout will be beneficial to shareholders. “This acquisition will significantly add to the company’s top and bottom line,” noted Green Organic’s CEO.

Pay attention to this buying opportunity

The marijuana industry has been incredibly volatile since its inception. In less than 12 months of going public, Green Organic’s stock has seen prices as high as $8 per share and as low as $2 per share. Now closing in on the bottom end of that range, long-term investors are currently able to scoop up shares at bottom-of-the-cycle prices.

By 2021, Green Organic may have 170,000 kilograms of premium-priced organic cannabis under production, plus a cash flow positive CBD business that’s capable of tapping a global market. With a strong foothold in the $9 billion Canadian cannabis market, plus exposure to other regions like Jamaica, Europe, Mexico, and the U.S., this is the buying opportunity you’ve been waiting for.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Investing

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Stocks for Beginners

Buying These 2 Stocks Is a Good Way to Hedge Against a Falling Market

Investors looking to hedge against a stock downturn should consider these two stocks as viable long-term picks.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »

The sun sets behind a high voltage telecom tower.
Energy Stocks

2 Utilities Stocks With Sought-After Stability

Here's why Fortis and Hydro One are two top utilities stocks long-term investors may want to consider right now.

Read more »

clock time
Tech Stocks

3 Top ‘Future’ Stocks to Hold for the Rest of This Decade

Canadian growth stocks like Constellation Software are starting to look appealing.

Read more »

Coworkers standing near a wall
Investing

Is Restaurant Brands International Stock Worth Buying in February 2023?

After an impressive rally, does restaurant stock QSR have more room to grow, or is it already fairly valued?

Read more »

financial freedom sign
Investing

Millionaire by 40: Top 4 Ways to Hit Your 1st Million

Canadians who want to hit the millionaire milestone by the time they hit 40 may want to target growth stocks…

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

There are some great Canadian stocks on sale right now. Here's a duo of companies I'm buying that you may…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Stocks for Beginners

Has ATZ Stock Bottomed Out?

Has ATZ stock finally bottomed out after losing nearly 10% of its value in 2022? Let’s find out.

Read more »