Friday, June 24, 2022

Signal Bay Inc (OTCMKTS:SGBY) Micro-Cap Focus Stock

Signal Bay Inc (OTCMKTS:SGBY) is a micro-cap stock sending out a signal it’s ready to dominate the booming cannabis industry. With less than two weeks to go until key marijuana ballot initiatives in 9 U.S. states, there’s understandably been a lot of excitement around the companies that could profit the most if recreational marijuana is legalized in a state like California.

One of those companies could be Oregon-based Signal Bay, Inc. (OTCMKTS: SGBY), which has been sending out a lot of signals that it’s looking to expand aggressively to California with its state-of-the-art cannabis lab testing operations.

Signal Bay Inc (OTCMKTS:SGBY) shares are currently trading at $0.024, giving the company a market cap of $26M. In just the past two and one-half months, though, the stock has been on a tear, accelerating from $0.0004 to $0.03. While the stock has given back some of those gains, investors are excited about the company’s acquisition plans headed forward.

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The company’s current strategy, as outlined in an Oct. 13 press release, is to dominate the market for marijuana testing. For now, that means testing services for cannabis in Colorado, Alaska, Washington State and Oregon. As more states legalize, the company’s services would expand accordingly. The company can test for potency, pesticides, E. coli, yeast, mold and other contaminants. The company already dominates the testing market in Oregon, where the company handles 95 percent of all legal cannabis testing via its EVIO Labs subsidiary.

But the real jewel in the SGBY crown is California. That’s because California could triple the size of the legal marijuana market overnight if the ballot initiative is approved on Nov. 8. As a result, SGBY has also outlined plans to expand in 18 different California markets by taking over or acquiring new lab facilities and operating them under the EVIO Labs brand. According to the company, it’s basically the Quest Diagnostics model, only for cannabis.

In addition to testing services, the company provides advisory, management and legal services to the cannabis industry, including services related to compliance, licensing and market forecasting. SGBY also operates a number of B2B information and media portals dedicated to the cannabis industry. The goal is to provide companies within the growing cannabis industry access to licensing, planning, compliance and operational support services. The only problem is that all of these consulting services didn’t really add up to an exciting business model.

Consider that in July, Signal Bay announced that it had reached the important milestone of 700 business accounts. That sounds impressive, until you consider that the company was only projecting annual revenue run rate of $700,000. That means each account was basically worth $1,000 each – certainly not a model that’s infinitely scalable.

So that’s why the new cannabis testing model makes much more sense from a revenue and profitability perspective. The new numbers look much more impressive. By growing the EVIO Labs business for just Oregon-related business, the company hopes to get to annual revenue of $1.4 million by 2016. But things are projected to really take off in 2017. By 2020, the company plans to have $45 million in annual revenue by operating 30 EVIO Labs locations (with most of them located in California).

But the big question becomes: Can the company really grow revenue by nearly 40-fold in just four years? There’s another concern as well – the massive acquisition spree of new testing facilities is not free. In the company’s latest quarterly filing, management noted that the acquisitions would be funded by issuing new company stock – something that traders think could be dilutive for shareholders.

The bigger picture, though, is that Signal Bay could be a fast-growth company in an extremely red-hot market, priced at a steep discount. If shares of SGBY are able to break out of their current $0.01-$0.02 trading range, they could be ready to head much higher. For more news on Signal Bay Inc. (OTCMKTS:SGBY) and other fast-moving penny stocks, please subscribe to now.

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