AgriForce Growing Systems Ltd. (AGRI) in Vancouver, Canada, made its market debut on July 8, 2021. The company is focused primarily on developing and acquiring crop production knowledge and intellectual property, which is supplemented by modern AgTech facilities and solutions. Its shares have gained 11.6% in price over the past month on the back of a recent strategic acquisition and advancement in its Manna Nutritional Group (MNG) food production and processing intellectual property (IP).

However, the stock is down 27.7% over the past six months and 14.5% over the past three months. In addition, closing yesterday's trading session at $1.74, the stock is currently trading 79.4% below its 52-week high of $8.45.

While the company strives to boost its growth through various differentiated strategies, its increasing investments could impact its cash reserves.

Here is what could shape AGRI's performance in the near term:

Acquisition

This month, AGRI agreed to acquire Delphy Groep BV (Delphy), a Netherlands-based AgTech consultancy business, for$29 million in cash and equity. AGRI intends to capitalize on the acquisition by expanding Delphy's consulting operations, establishing a research and development center in North America, facilitating greater penetration of its Asian markets, and expanding its operations in international markets where Delphy already has a presence.

Mixed Financials

AGRI's cash and cash equivalents increased 1405.1% year-over-year to $9.83 million for the nine months ended Sept. 30, 2021. However, its operating loss grew 142.7% from its  year-ago value to $2.38 million for the third quarter, ended Sept. 30, 2021. The company's net loss increased 87.3% from the prior-year quarter to $1.82 million, while its loss per share grew 16.7% from the prior-year quarter to $0.14.

Poor Profitability

AGRI's trailing-12-months ROC and ROA are 45.2% and 32.7%, respectively. Furthermore, its cash from operations stood at a negative $3.24 million compared to the $441.90 million industry average.

POWR Ratings Reflect Uncertainty

AGRI has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AGRI has a D grade for Stability, which shows higher volatility than its peers. In addition, the stock has a C for Growth and Quality, which is in sync with its mixed financials and profitability.

Among the 30 stocks in the D-rated Agriculture industry, AGRI is ranked #21.

Beyond what I have stated above, one  can view AGRI ratings for Value, Momentum, and Sentiment here.

Bottom Line

While the company's increasing investments across business operations indicate strong long-term growth prospects, it has yet to generate any meaningful revenue and is still in the early stages of development. In addition, the stock is currently trading below its 50-day and 200-day moving average of $1.78 and $1.83, respectively, indicating a bearish sentiment. So, considering its inadequate financials, we believe investors should wait for its prospects to stabilize before investing in the stock.

How Does AgriFORCE Growing Systems Ltd. (AGRI) Stack Up Against its Peers?

While AGRI has an overall C rating, one might want to consider its industry peers, Nutrien Ltd. (NTR) and Archer Daniels Midland Co. (ADM), which have an overall A (Strong Buy) rating.

AGRI shares were unchanged in premarket trading Wednesday. Year-to-date, AGRI has declined -16.35%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

More...