Vertical farming is a hot topic with significant productivity-based advantages. In fact, the industry is forecasted to grow by 24.1% annually until 2031, illustrating its potential. As a result, investors are looking into vertical farming stocks for massive returns.
Given the above, I embarked on a journey to find three undervalued vertical farming stocks. I was aware that value and growth traps are prominent due to the industry’s immature state. As such, I applied a robust screening methodology, which looked at fundamental sustainability, valuation metrics, and structural growth. Moreover, I applied technical analysis where necessary to identify key pricing points.
Vertical farming stocks are risky as the industry has yet to consolidate, meaning related stocks aren’t suitable for all investors. However, if your risk tolerance is high, then here are three vertical farming stocks worth considering.
LED lighting used to grow lettuce inside a warehouse without the need for sunlight
Source: Martin Bergsma / Shutterstock.com
Urban-Gro (NASDAQ:UGRO) fulfills a critical role in the vertical farming industry: facility development. The company designs, develops, and manages value-added infrastructure tailored to numerous end markets.
Fundamentally, I enjoy Urban-Gro’s nimble approach and early-to-market stature. However, I also find some of its other aspects commendable. For example, Urban-Gro recorded a hefty project backlog of $99 million in March. Additionally, the company recently reported its first-quarter earnings, revealing $15.5 million in revenue, a 4% year-over-year increase.
The abovementioned variables play into a broader growth story, which is encouraging, as UGRO stock’s price-to-sales ratio of 0.25x suggests it is grossly undervalued. Moreover, UGRO stock’s technical variables are aligned as it recently surpassed its ten- and 50-day moving averages, indicating a momentum trend has been shaped.
UGRO stock might be volatile for the foreseeable future, as Urban-Gro is an early-stage enterprise. Nevertheless, asymmetrical returns are possible if Urban-Gro’s fundamental variables build on their recent progress.
Village Farms International (VFF)
Hydroponics,Organic fresh harvested vegetables
Source: bluedog studio / Shutterstock.com
Village Farms International (NASDAQ:VFF) is a horizontally integrated company that supplies numerous greenhouse goods in the U.S. and Canada. In addition to supplying fresh produce, Village Farms participates in the North American cannabis industry, providing an additional growth multiplier. Moreover, the company has operated for over thirty years, translating into substantial human capital synergies across its verticals.
Furthermore, Village Farms International has promising short-term support. For example, the company released its first-quarter earnings report in May, revealing $77.88 million in revenue, a 21% year-over-year increase. Village Farms’ key drivers were a 28% year-over-year increase in Canadian retail cannabis sales and enhanced regional market share.
Furthermore, Village Farms’ fresh produce segment has recovered from its loss by posting $100,000 in net income. I believe the segment’s turnaround is a sign of things to come on a firm-wide level, which could add substance to VFF stock’s price-to-sales ratio of 0.4x.
Village Farms International is a scalable company. Although inefficiencies remain, I’m bullish about VFF stock’s prospects as it seems like a telling growth story.
Agrify Corporation (AGFY)
bearded man tending kale crops in urban communal garden, AGFY Stock
Source: Joshua Resnick / Shutterstock.com
Agrify (NASDAQ:AGFY) is a hardware and software company that offers various products to the cannabis industry. The firm generates multiple revenue streams, from software-as-a-service to facility development assistance. Moreover, Agrify services the medicinal and hemp end markets, providing it with critical diversification attributes.
I mainly included AGFY stock in today’s list as it is an event-driven opportunity. The company recently sealed a $500,000 turnkey contract to provide extraction equipment to Grotech farms. I believe the event adds volume to Agrify’s revenue mix, allowing it the latitude to focus on developing additional products. In addition, the contract adds substance to AGFY’s price-to-sales ratio of 0.08x, suggesting that absolute value is in play.
It must be outlined that Agrify has a few risks. Firstly, the NASDAQ issued a non-compliance warning earlier this year when Agrify’s equity value fell below $2.5 million. However, the firm executed a $13.8 million debt-to-equity conversion to settle the dispute. Furthermore, AGFY is a young company with a short trading history, meaning it has yet to prove its intrinsic worth.
Despite having certain reservations about Agrify, I remain bullish and believe the stock will reach great heights!
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for cross-asset research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve obtained his CFA Charter on April 26, 2024, and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace don’t constitute financial advice. However, they form an interesting juxtaposition between mainstream opinion and objective theory, allowing readers to benefit from unbiased commentary. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.
