Rubicon Organics (TSXV:ROMJ) & Auxly Cannabis (TSXV:XLY): 2 Junior Pot Stocks to Explore

Summary

  • Rubicon OrganicsTM ranks among TMX Money’s Rising Stars– a list of 50 upcoming TSXV stocks that have posted the largest price gains in the last three months.
  • Auxly Cannabis Group’s 10-day average trading volume is 2.33 million, making it among the most active stocks across the TSX and the TSXV.
  • Legal pot sales touched C$648 million in the second quarter of 2020, a 15 per cent jump year-over-year.

The coronavirus pandemic has had a hindering impact on almost every sector. However, some industries profited from the economic turmoil cause by the pandemic. Handful healthcare companies entered the race to develop the COVID vaccine. Others went on an overdrive producing protective equipment, test kits and ventilators. Then there were information technology (IT) businesses enabling work-from-home model and providing remote connectivity. There’s also been a huge demand for digital entertainment platforms like streaming content apps.

Cannabis is another industry that boomed during the pandemic. Legal pot sales touched C$648 million in the second quarter of 2020, a 15 per cent jump year-over-year.

As Canada celebrates the two-year anniversary of marijuana legalization, let us take a look at two junior cannabis stocks that have gained ground amid the COVID-19 outbreak: Rubicon Organics Inc. (TSXV: ROMJ) and Auxly Cannabis Group Inc. (TSXV: XLY).

Rubicon Organics Inc. (TSXV: ROMJ)

Current Stock Price: C$ 4.05

Vancouver-based drug maker Rubicon Organics™ cultivates cannabis crop to process and sells medical cannabis. Its operations spread are across North America.

Stock Performance

Rubicon Organics™ stocks tumbled to C$ 1.8 on March 14 this year. However, the stocks have gradually regained since, soaring almost 125 per cent in the last seven months and about 42 per cent in the last three months. Its scrips registered an increase of 120 per cent year-to-date (YTD). The pot stock’s market capitalization stands at C$ 188 million. The price-to-book ratio is 6.783. 

Rubicon Organics™ ranks among TMX Money’s Rising Stars stocks – a list of TSXV companies that have posted the largest price gains in the last three months. The company also ranks on TMX’s top healthcare companies that have outperformed their peers in the last 30 days on the TSX and the TSXV.

The company was earlier trading on the Canadian Securities Exchange and moved to the TSXV in July.

Financial Highlights

The company received its medical sales license from Health Canada in May this year. In the second quarter of 2020, the gross revenue of Rubicon Organics™ surged to C$ 1.2 million, up nearly 140 per cent compared with C$ 0.5 million in the first quarter of the current fiscal year. The company posted a net loss of C$ 1.8 million in Q2 2020, as compared to a net loss of C$ 3.8 million in Q1 2020.

Rubicon Organics™ Year-To-Date Chart (Source: Refinitiv, Thomson Reuters)

Auxly Cannabis Group Inc. (TSXV: XLY)

Current Stock Price: C$ 0.295

Vancouver-based Auxly Cannabis Group Inc. invests and operates in the cultivation of cannabis. The company generates most of the revenue from Canada. Its other items include chocolates, soft chews, oil capsules, mints, etc.

The company recently collaborated with Greentec under the Kolab Project for an industry-wide vape recycling initiative for all cannabis vendors.

Stock Performance

Auxly’s 10-day average trading volume is 2.33 million, making the pot firm one of the most active stocks across the TSX and TSXV.

The stocks have recently picked up the momentum and increased by 90 per cent in the last one month. Its scrips posted an increase of 34 since the pandemic-led market crash on March 19. The junior pot stock’s market capitalization stands at approximately C$ 190 million. The price-to-book ratio is 0.819 and the debt-to-equity ratio is 0.48. 

Auxly Cannabis ranks highly among TMX Money’s junior cannabis stocks – a list of micro and smallcap cannabis stocks. The stock has also been ranked on the top healthcare companies that have outperformed their peers in the last 30 days on the TSX and the TSXV.

Financial Highlights

Auxly posted net revenues of C$ 8.6 million for the second quarter ended on June 30, 2020, up 200 per cent from the second quarter last year. Cannabis net revenues was C$ 6.8 million and research revenues from its subsidiary KGK Science Inc was C$1.8 million.

Auxly reported a gross profit of C$ 2.8 million following value adjustments during the second quarter of 2020 and C$ 5.5 million during the first half of the current fiscal year. Auxly’s Kolab Project collaborated with Greentec on an industry-wide vape recycling initiative for all cannabis vendors.

Why are Cannabis Stocks Gaining Traction?

Cannabis has become a hot topic in the US elections. The presidential campaigns of both Democrats and Republicans are centred around the legalization of marijuana, raising hopes of a potentially large cannabis market.

Multiple studies have shown the health benefits of cannabis and its derivatives. A report conducted by the World Health Organization (WHO) in 2016 show positive impacts of cannabis use on multiple sclerosis and cancer patients.

As legalization gains momentum worldwide, global cannabis market is expected to hit USD 97.35 billion by 2026-end, according to a Fortune Business Insight study.


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