Very Good Food stock caught my eye when I saw it on some YouTube thumbnails and then when I was asked to get paid to do a video on them. I don’t do paid promotion videos but when something like that happens, I like to do a Sven Carlin style analysis for free. Here is the Very Good Food Stock video analysis:
I’ll write up some key points of the analysis but watch the video for a thorough explanation.
Very Good Food Stock went public in June of 2020 and the IPO was done at CAD$0.25 per share. However, the stock never traded that low as it immediately spiked to $1 and even $2, only to settle down around $1.
VERY.CA – Very Good Food Stock Canada
VRYYF – USA OTC
In short, from a corporate perspective, we have about 77 million shares issued for an average CAD$ 0.1 per share and a stock that never went below $1 on very low volume.
Then, as the company’s marketing efforts, not on the business front, but on YouTube, started making progress, with just a few millions buying, the stock jumped to the current $3.32.
This pushed the market capitalization of Very Good Food Stock to the current CAD$282 million! $282 million is insane on a stock that has maximally a few million of daily trading volume while YouTube channels with more than half a million viewers promote it.
So, good stock price action, there must be great things going on in the business. Well, I looked at the business and the business is really good! In Q2 2020 they made $1.1 million in sales. If they continue like that, they might reach $4 million for 2020. This would put the price to sales ratio to 70.5!
Ok, a deserves to trade at a price to sales ratio of 70 if it grows fast and it is very profitable, I would agree on that. Very Good Food will likely grow as it expands to California, but is not profitable, actually they have spend CAD $2.6 million to realize the $1.1 million in sales.
Very Good Food Stock reminds me of many Cannabis stocks from a few years ago. The strategy was the same, push the stock price as high as possible, reward management with many stock options for growth targets, selling a story of high future profitability based on the idea that the totally addressable market is huge. $30 billion is their expectation for vegan burgers.
In the video, I discuss many interesting situations, from hiring a CEO from previous cannabis stocks to borrowing money at a 61.2% interest rate. Enjoy the video if you wish to know more.
My final message is about the market, if this is possible, to push a business with $4 million in sales to a market capitalization of $282 million, maybe we should all just do crazy IPOs and get rich quickly!
Unfortunately this is how Wall Street works! And, that is not just the case with small cap stocks trying to make a buck, but it goes all the way up to the biggest and largest companies out there. We have seen what happened in 2009, we have seen how far up this greed world goes, and unfortunately, the culprits of that crisis got all bailed out. I feel sorry for the small investor in such stories like cannabis stocks, will likely lose a lot over time. Maybe not on the Very Good Food Stock, but then surely on the next great opportunity. That is how it works!
It is up to you to decide what kind of investor you wish to be; one that follow and chases the crowd or one that invests and wants to get rich slowly!
“Investing should be as watching grass grow or paint dry”
“If you are having fun while investing, you are likely to be in a very dangerous situation”