Do Not Hold Out For a Recovery In Isodiol
Isodiol International finally reported its fiscal 2019 financial results following a delay. The postponement amounts to the latest in a series of setbacks that have taken ISOLF stock to the 23-cent per share range. It hit that low as the company announced on July 30 that they would delay reporting their fiscal 2019 results. Not surprisingly, investors were greeted with news of massive losses and goodwill write-downs when the company finally released the report. This speaks to the poor, and likely, irreparable fiscal shape of the Vancouver-based producer of hemp-based consumer products. With some of the hype wearing off from the marijuana industry, now is not the time to take a chance in ISOLF stock.
Isodiol (Finally) Reported Fiscal 2019 Results
Revenues for the fiscal year came in at about C$22.25 million ($16.71 million). This increased by 16.26% from year-ago levels. The company also reported a GAAP loss of C$3.14 ($2.36) per share. However, the biggest news came in the form of reported write-downs and business losses. Asset impairment amounted to $38.88 million. This included both divestitures and balance sheet impairment of both goodwill and intangibles. Much of the news also focused on non-cash losses on the sale of some business amounting to $35 million. The company had to divest Kure as they could no longer make future payments to hold on to those entities. Other sales included divesting Azure for one million dollars. According to the company, this sale allows them to turn from manufacturing to consumer goods they believe will bring higher margins. The company also sold BSPG for $14 million.
News Confirms Bleak Outlook
Such news will likely not rescue ISOLF stock. It has remained volatile but has not always suffered. In late 2017, it moved as high as $16.90 per share as speculative interest in cannabis stocks began to take hold. Last fall, it saw a more muted recovery as the stock reached a near-term high of $4.40 per share. At the height of legalization anticipation last fall, Isodiol followed most other Canadian marijuana stocks higher. However, since that point, ISOLF stock has seen a relentless slide. By Christmas week, it had fallen below $1 per share. Unlike other marijuana stocks, it did not recover. The decline has continued, and it fell as low as 23 cents per share following the earnings announcement. Though it has bounced back to around 36 cents per share, the prospects for a recovery in Isodiol appear bleak.
Final Thoughts On ISOLF Stock
ISOLF stock seems to have no visible path to recovery. The massive losses, as well as divestitures and asset impairment, explain why the equity has fallen to 36 cents per share. Moreover, due to a large number of marijuana companies in existence, it's likely numerous penny stocks will either sell out to more significant players or close their doors. The legalization of hemp in the U.S. increases the likelihood of this outcome for Isodiol. Given the demand for CBD oil and other products derived from strains of cannabis, this industry looks positioned for a bright future. However, with Isodiol’s weak fiscal outlook, do not expect ISOLF stock to benefit from the marijuana boom. The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer. Read the full article
