Investing in the marijuana industry has been a rollercoaster ride over the past five years, but one thing has become abundantly clear- the sector is here to stay. As legalization sweeps across the globe, investors are looking to pick out winners that will deliver long-term growth in the pot space. Of course, it’s difficult to know for certain which marijuana players will shake out on top, but there’s one marijuana stock that stands out above the rest: Charlotte’s Web Holdings (OTCMKTS:CWBHF).
With a P/E ratio above 200 and industry uncertainty still looming, CWBHF still carries a degree of risk. However, for a pure play in the pot industry, Charlotte’s Web stock is surprisingly safe.
Plus, the firm has a huge growth runway and a lot of clout in the marketplace. Here’s a look at three reasons CWBHF stands out from the pack of marijuana stocks.
Legalization has been a boon for marijuana growers and distributors alike, but the fact remains that marijuana is still illegal at a federal level. While most expect that to change eventually, it’s unlikely to be a fast process. This hangs over the weed industry like a dark cloud. Fortunately, the weather is a bit better for companies like CWBHF, whose products are completely legal across the U.S.
Unlike many marijuana stocks, Charlotte’s Web only markets hemp-based products, which means the firm is able to sell them anywhere. At the end of 2018, the firm said it sold its products in 3,680 retail locations and that figure is seen rising in the year to come. Last year President Trump’s passage of the Farm Bill made hemp and hemp-based CBD products legal, which should help CWBHF’s reach across the US.
Another big reason investors should consider CWBHF is the firm’s clout within the therapeutic CBD market. The brand got its name by creating cannabis oil to treat a little girl named Charlotte who was suffering from seizures. While Charlotte’s Web CBD didn’t cure the little girl, it did make a dramatic improvement in her condition which has created a significant demand for CWBHF products. The strain produced by Charlotte’s Web offers a great deal of therapeutic CBD with very little THC, a highly sought after combination.
That kind of clout is important, but even more so is the fact that CWBHF has held on to its seeds — meaning patients can only get the kind of results Charlotte did by using CWBHF products. That has given Charlotte’s Wb pricing power that most other cannabis companies simply don’t have. People are willing to pay a premium for CWBHF products and that’s something investors should value.
CWBHF Is a Conservative Play — For a Marijuana Stock
Investing in the marijuana industry is inherently risky because of the sector’s newness, but CWBHF is about as safe as you can get while still holding a pure-play. Not only does the firm sell products already considered legal by the U.S. government, but it’s finances are impressive for such a high-growth company.
CWBHF is one of the only marijuana companies that has been able to report a true operating profit that hasn’t been helped by adjustments or one-time benefits. Sales growth has been phenomenal, with the firm reporting fourth quarter sales up 71% from the previous user and 21% from Q3. Revenue growth in the fourth quarter was also impressive — up 75% from the year-ago quarter.
On top of the firm’s profitability and impressive growth, it holds very little debt. CWBHF’s debt to equity ratio is just 0.10. That’s another rarity in the marijuana industry where companies are fueling growth on borrowed funds.
The Bottom Line for Charlotte’s Web Stock
The cannabis industry can be a minefield when it comes to picking marijuana stocks that will emerge as winners in a quickly growing industry.
However, Charlotte’s Web appears to be head and shoulders above the rest of the pack which makes it a good option for investors wanting to add the industry to their portfolios. Plus, CWBHF is one of the most conservative pure-plays out there, so it’s a good way to dip a toe into the marijuana industry without taking on too much risk.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.