Novo Integrated Sciences (NASDAQ:NVOS) stock is skyrocketing on Tuesday, enlivening a down session on Wall Street amid global economic concerns. Ironically, the news that’s bolstering NVOS stock features some strong international overtones, with Novo entering a joint venture (JV) agreement with Canada’s Farm 7 Group to implement the Kenya Agricultural Cooperative Project.
According to Novo’s press release, the JV focuses on a Kenya-centric agricultural project with “finalized and executed uptake contracts for food-based agricultural goods on up to 9 million hectares.” The project may generate potential revenue of up to $350 million. Further, the JV carries an initial term of 30 years, providing for the annual distribution of net profits, with 75% earmarked for Farm 7 and 25% for Novo.
“With F7 having secured guaranteed commodity buyer contracts for annual delivery of up to 1.6 million metric tons of food-based harvested commodities such as cassava starch, yellow corn, wheat, soybean, and sunflower, the project is anticipated to have significant financial impact on both organizations,” said Novo Chairman and CEO Robert Mattacchione.
NVOS Stock Impresses for the Day, But Remains Risky
With NVOS stock shooting up by more than 60% as of this writing, it’s clear that investors appreciate the company’s recent disclosure. Fundamentally, the JV lends some much-needed credibility to Novo. However, the problem is that the firm needs many more victories to really inspire confidence.
Glaringly, despite the rally, NVOS still only trades at about 11 cents per share. That’s extremely low even for speculators. Novo Integrated Sciences also carries a market capitalization of less than $17 million. With the nano-cap cutoff sitting at approximately $50 million, anyone who ventures down this path will be taking extreme risks.
To be fair, NVOS stock may benefit from the law of small numbers during periods of extreme excitement. At the same time, though, the opposite is also true. Timing is particularly critical for Novo as well. For example, in the trailing one-month period, NVOS has lost about 13% of equity value.
On the financial front, investment data aggregator Gurufocus warns that Novo suffers from seven red flags. These include poor business operation (as determined by a Piotroski F-Score of 3), declining revenue per share and an Altman Z-Score in negative territory, indicating distress and possible bankruptcy risk in the next two years.
Why It Matters
Although penny stocks like Novo attract speculative attention for their get-rich-quick allure, they can be extremely dangerous. Multiple warnings — including from the U.S. Securities and Exchange Commission — plead for investors to use sound judgment. Moreover, NVOS stock risks being delisted from the Nasdaq if it cannot comply with the minimum bid price rule.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
