Stifel GMP has repeated its 'Buy' rating on The Valens Company as it thinks the company's profile "risk-reward seems appealing now".
In a note to clients, the broker's analysts noted that Valens recently announced a $40 million debt financing at 10% to shore up its balance sheet with non-dilutive capital and refinance existing debt.
They said: "We view this positively as it avoids raising equity at 52-week lows, while also de-risking the company's outlook."
READ: The Valens Company secures C$40M term loan to support “aggressive growth strategy”
The analysts added "With pro forma cash of ~$60m and a current quarterly burn rate of roughly ~$10m-15m, we believe VLNS has the resources to reach profitability expected in FY22. As a result, we are surprised to see yesterday's negative price action, with VLNS shares underperforming the MJ index by ~12% points.
"Admittedly, we have limited visibility on near-term price action, given macro pressures and sector volatility, but cannot ignore the attractive risk-reward opportunity with shares trading nearly ~20% below estimated proforma book value."
They concluded: "Matched with our conviction in management to execute its strategic plan and fulfilling the 'show me' story, we believe now is a good time to revisit VLNS."
Contact the author at jon.hopkins@proactiveinvestors.com