Our Eco Science Solutions Stock Prediction In 2019 (Buy or Sell?)
The marijuana boom is a genuine investment opportunity, but only if you separate the hype from reality. Problem is, the cannabis “green rush” is generating clouded judgment among investors, especially when it comes to penny stocks.
The buzz over marijuana penny stocks reminds me of the gold-crazed miners in the 1948 movie classic The Treasure of the Sierra Madre. The prospectors in this movie are so blinded by greed, they end up with nothing but self-imposed woe.
Along these lines, one penny stock that’s garnering keen investor attention is Eco Science Solutions (OTC: ESSI). Curiously, ESSI isn’t directly involved in the marijuana industry. The assumption is that the company’s technology-focused products could make the stock a picks-and-shovels play on cannabis.
Is Eco Science Solutions a quick path to riches? Or is the stock a potential portfolio killer? Let’s go prospecting for the truth.
What Is Eco Science Solutions?
Hawaii-based Eco Science Solutions provides software solutions for the wellness and alternative medicine industry. Its services connect consumers and businesses to facilitate social networking, inventory management, payment transactions, and delivery.
The company’s e-commerce platform makes it easier for wellness enthusiasts to locate and connect with wellness businesses and individuals for the purposes of purchasing eco-friendly products.
With a market cap of about $932,000, the company offers a “Herbo” app that helps consumers find alternative products and services to pursue a healthier lifestyle. The firm’s “Fitrix” app allows users to monitor daily fitness routines, dietary habits, and the consumption of alternative medicine.
How Has Eco Science Solutions Performed?
Eco Science Solutions’ stock has consistently under-performed the broader market, but with dramatic short-term spikes along the way.
- Over the past 12 months, Eco Science Solutions has lost 60% whereas the S&P 500 has lost 7%.
- Over the past two years, Eco Science Solutions has declined 99.2% versus a gain of 10.2% for the S&P 500.
- Over the past five years, Eco Science Solutions has lost 99.5% compared to a gain of 36.2% for the S&P 500.
See five-year price chart:
How Has Eco Science Solutions Performed In 2017/2018?
- In 2017, Eco Science Solutions fell 97.6% compared to a gain of 19.4% for the S&P 500.
- In 2018, Eco Science Solutions declined 58% compared to a loss of 7% for the S&P 500.
Who Are Eco Science Solutions’ Rivals?
Eco Science Solutions’ potential competitors are indirect picks-and-shovels plays on the marijuana bonanza. They provide the infrastructure tools that marijuana companies (especially start-ups) would need. Here are three notable examples:
Shopify (NYSE: SHOP)
With a market cap of $15.1 billion and based in Canada, Shopify provides a cloud-based multi-channel commerce platform for small and medium-sized businesses in Canada, the U.S., the U.K., Australia, and around the world.
Blue Line Protection Group (OTC: BLPG)
Based in Denver, Colorado, Blue Line Protection Group (market cap: about $807,000) offers financial services and logistics, state and federal regulatory compliance assistance, and physical security for the marijuana industry.
A private firm based in Austin Texas, Volusion offers web development, marketing, hosting, and order management. Volusion was one of the first companies to offer e-commerce software and was a pioneer in developing online “shopping carts.”
Will Eco Science Solutions Go Up In 2019 (Should You Buy)?
The media these days is fixated on pot stocks and all it takes is a positive news event to send a marijuana company’s shares soaring. ESSI shares have a history of popping according to news events, such as favorable government policy changes regarding marijuana and its cousin hemp.
A recent profit catalyst for the entire marijuana industry was passage of the 2018 Farm Bill, signed into law on December 20, 2018 by President Trump. The bill removes hemp-based cannabidiol (CBD) from “scheduling” under the Controlled Substances Act and places it under the aegis of the U.S. Department of Agriculture. In effect, the bill decriminalizes hemp and its components.
On October 17, 2018, Canada became the second country, after Uruguay, to legalize possession and use of recreational cannabis for all adults. Medical marijuana has been legal in Canada since 2001.
This video provides more details on Canada’s watershed move:
In the U.S., marijuana remains illegal on the federal level. However, individual states can adopt their own legal standards for marijuana thanks to Congress, which prohibits drug enforcement agents from pursuing marijuana growers and users in states where pot is legal. In the U.S., 30 states and the District of Columbia have legalized marijuana to some degree.
According to Ameri Research, the global legal marijuana market generated spending of $14.3 billion in 2016 and is forecast to grow at a compound annual growth rate of 21.1% between 2017 and 2024, culminating in 2024 revenue of $63.5 billion.
Investors aren’t just targeting companies that are directly involved in cannabis. They’re also eyeing the the stocks of companies that provide the vital proprietary technology necessary for marijuana infrastructure work — in other words, they’re investing in the makers of “picks and shovels.”
The betting among some investors is that Eco Science Solutions is one such play. The gold mining metaphor is again apt.
During the California Gold Rush of 1848-52, more than 250,000 people flocked to the Golden State in the search for wealth. All of these gold prospectors had to purchase picks and shovels to mine for the yellow metal; few actually got rich. But the sellers of picks and shovels made a fortune.
Here’s how Eco Science describes its Herbo app:
“[The Herbo app entails] a database of over 14,000 alternative medicine locations and delivery services, doctors who provide evaluations, and local shops that sell relevant product. The Herbo app helps consumers find products and services that support the intake of alternative medicines for a more naturopathic way of living.”
And here’s how the company describes its Fitrix app:
“The Fitrix app is a powerful and flexible companion that helps you keep track of your day-to-day fitness routines, dietary habits and alternative medicine intake. Fitrix users can measure and track anything and everything when it comes to their Health and their Wellness. One can track the accomplishment of custom created goals; monitor dietary, exercise and alternative medication schedules; be notified of important milestones; establish timelines to develop effective habits … all leveraging a unique notebook and calendar.”
The company claims that its “e-commerce platform enables cannabis enthusiasts to easily locate, access, and connect with cannabis-businesses and like-minded enthusiasts, and to facilitate the purchasing of cannabis-related products…anytime, anywhere.”
Will Eco Science Solutions Go Down In 2019 (Should You Sell)?
Eco Science Solutions has generated headlines but on closer inspection, it appears that the company has in the past paid for articles that hype the company as a potential marijuana industry infrastructure play.
These articles have suggested that Eco Science could become the next Amazon (NSDQ: AMZN) of the cannabis industry, by connecting buyers, sellers, growers, and medical professionals. That’s far-fetched, to say the least.
I won’t go so far as to accuse the company of engaging in pump-and-dump schemes, but it appears that all Eco Science has to offer are a couple of apps that are quite basic. The company’s Facebook page, meanwhile, implies that Eco Science is deeply immersed in the marijuana industry, but there’s little apparent substance to the company’s ties to cannabis beyond a lot of social media atmospherics about the health benefits of pot.
Overall Eco Science Solutions Forecast And Prediction For 2019
Eco Science Solutions’ home base of Makawao, Hawaii is undoubtedly sunny, but the company’s fundamentals are dreary.
In the most recent quarter (Q3 2018), earnings before interest, taxes, depreciation and amortization (EBITDA) came in at -$4.9 million; cash on hand was a paltry $1,000; total debt amounted to $4.8 million; and return on assets came in at -2,842.4%.
Losses are deepening. The company posted a quarterly net loss per share of $-0.04, compared to a net loss per share of $-0.02 recorded in the same quarter a year ago.
Ignore the hyperbole over this penny stock. You should regard Eco Science Solutions’ stock the way Superman regards kryptonite — in other words, keep your distance. These shares are toxic.
John Persinos is the managing editor of Investing Daily.