Everything You Need to Know Before Investing it in ECS Botanics Holdings Ltd (ASX_ ECS)
ECS Botanics is a Tasmania based Hemp producing company, that aims to put Australia on the global map for high quality, chemical-free hemp production. The company prides itself on growing hemp that is free from any sort of chemical addition to the soil. The company also has a portfolio of hemp-based products.
The company has a vision of changing the world through hemp and supporting a healthy planet with sustainable products and a healthier more cleaner lifestyle for everyone.
The products offered by ECS Botanics are made from 100% Tasmanian hemp. ECS Botanics offers the following hemp based products
- Australian hemp seed oil
- Australian hemp seed oil capsules
- Australian hemp seed oil capsules with turmeric
- Australian hemp seeds
- Australian hemp protein powder
- Mexican spiced bean soup
- Indian masala lentil soup
These products are available at Woolworths in Australia and also through the official ECS website. Additionally ECS also supplies the following products in bulk to wholesales. Their bulk orders start from 5 kg and go up to 1 tonne for cafes, food manufacturers and food suppliers.
- Hemp seed oil
- Hemp hearts
- Hemp protein
- Hemp flour
- Hemp meal
- Hemp husks
- Hemp husk lights
- Hemp cake
- Hemp nectar
The financials of ECS are like any other company in the hemp sector. The company has got a positive revenue figure which is a good sign. This shows that the company has managed to find a market for their products. The revenue for 2020 was over AUD 400,000.
The net profit however is a different story. The company has been running a net loss since the last few years and this is typical for the hemp industry where the startup costs and expenditures are too high for young companies to make any sort of profit in the early years.
While the profitability of the company is not good, all other financial indicators are showing a good and solid foundation for the company to build upon. The liquidity position for instance is very strong. In fact too strong, the current ratio is well over 7 and the quick ratio as well is over 6. Now firstly this means that the business does not have a shortage of cash. In fact the business has got more cash than it should have.
Such high liquidity ratios mean that the business is not utilizing its available cash to its full extent. All of this extra cash could be invested, instead of sitting idle. The gearing ratios are also very low, this means that most of the business is financed through equity and not through debt. It must however be remembered that it is not necessarily a bad thing for a business to be financed through debt. Debt can be used for investment and other purposes. Debt is only bad when ite exceeds a certain amount relative to the income and business assets.
The price to book ratio, which measures the market value of shares with the book value of the business is quite high at almost 12.13. This shows that the market is placing a lot of confidence in the stocks of ECS botanics right now. One can even say that the market value of the ECS is inflated at the moment.
For investors, this means that ECS is at the moment an overpriced stock. It is currently trading at AUD 0.05 and just a week ago it was at AUD 0.07, so this shows that the market may be adjusting itself by reducing the market price of ECS stock.
To Invest or Not to Invest?
ECS Botanics is situated in a sector that is infant and growing at a very rapid pace not just in Australia but across the globe. If we look at the profile of ECS botanics, we can see that the business is aimed at growing the finest quality hemp in Australia, which makes them focused on the growth of hemp. ECS also makes some very basic products from hemp such as hemp oil and hemp seeds etc. This puts ECS in a very strong position to diversify in future and grow.
At present, however, ECS is not diversified enough to grow beyond its current horizon of producing high-quality hemp. Thus the share price of ECS is dependent on the overall performance of the hemp market, as long as the company does not diversify itself or grow beyond its current size.
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