The business of producing food is integral to societies everywhere. Historically, it was done primarily in rural settings. However, the world is becoming increasingly urbanized, increasing the demand for urban farming. Urban farming stocks are a relatively small sector but one with the potential to grow rapidly.
Not only are large firms looking to capitalize on ways to grow food in urban settings, but so are everyday people. Speaking anecdotally, it’s become relatively common to see indoor gardens for personal consumption. Additionally, the rise of the cannabis industry provides another growth catalyst for urban farming. In short, it’s an interesting sector in which to invest.
Local Bounti (LOCL)
Local Bounti (NYSE:LOCL) is one of the higher-priced stocks in what is, in general, a highly speculative sector. What I mean here is simple: Urban farming is a very nascent industry, and investors should tread carefully.
In any case, Local Bounti is a company that produces stackable controlled environment equipment. The company produces a few varieties of lettuce and herbs. The entire purpose of the company is to produce and deliver local produce as close as possible.
The company claims its processes result in using 90% less land and 90% less water than in traditional agriculture. The company has facilities in Washington, Montana, Texas and Georgia. It is purchasing assets in Southern Central California.
Although local Bounty is currently focused on greens, it has plans to diversify into meal kits, berries and additional crops in the next few years. In Q3, Local Bounti reported $6.8 million in revenues, leading to a profit of $400,000.
Village Farms (VFF)
Village Farms (NASDAQ:VFF) is a firm focused on the controlled environment agricultural (CEA) space with a focus on the cannabis industry. Given that cannabis is a high-value plant, that arguably makes VFF stock more attractive for investors.
As noted before, most shares in this space are inherently pretty speculative. Village Farms is no different in that regard and is a penny stock that trades for roughly $0.75. That said, it is highly regarded in that all seven analysts covering its shares give it a Buy. Further, those analysts assign it an average target price of $1.83. Risky, yes, but also full of return potential.
The company is focused on the cannabinoid market with a focus on THC content across the spectrum. Village Farm owns multiple subsidiaries throughout North America. In Canada, it fully owns and operates Pure SunFarms, which has been EBITDA-positive since 2018.
In the United States, Village Farms owns Balanced Health Botanicals. That business includes a top-five CBD producer and an operational footprint that spans 5.5 million square feet.
Like many other cannabis firms, Village Farms is currently focused on improving operational efficiency to approach profitability. The company made important strides in that regard but is not yet quite profitable.
There’s plenty of reason to consider urban-gro (NASDAQ:UGRO) stock overall. Primarily, investors should consider the company and its shares because of its fundamental improvement.
Generally speaking, there continues to be a large push toward profitability and efficiency within the cannabis market. Many firms in the space are seeing capital inflows as they prove they can better their operations. However, most of those firms are also seeing a concurrent decline in revenues.
Urban-gro managed to both improve its operations and also grow its top line. That makes it something of an outlier in the space and provides a strong reason for investors to consider the firm.
The firm’s net loss narrowed from $5.3 million to $3.4 million year-over-year during the most recent quarter. That is a positive result. Perhaps more importantly, the company’s revenues grew by 69% during the same period, reaching $20.9 million. The cannabis market is not noted for growth at the moment and that makes this a stock to watch.
On the date of publication, Alex Sirois 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.