Ceapro Inc (TSXV: CZO) is engaged in the development and application of proprietary extraction technology to produce extracts and active ingredients from oats and other renewable plant sources. Its operating segments are the Active ingredient product technology industry and the Cosmeceutical industry. 

Key highlights 

• Long Cash Cycle days: The company is holding higher Cash Cycle (Days) compared to the industry, implying the company takes more days to convert its inventory to cash. Currently, its Cash Cycle is at 112.0 days compared to an industry median of 77.4 days. This higher number raises some concern.

• Rising consolidated receivables: In Q1 2022, the company consolidated receivables increased by 69% to CAD 3.6 million against CAD 2.1 million in the previous corresponding period.

• Trading above the upper band of the Bollinger Bands: Recently, the stock witnessed a healthy rally on the daily price chart and has moved close to the upper band of the Bollinger band, also it might face a resistance at the current level, where the stock is trading, indicating the stock is perhaps overbought and due for a price correction or a consolidation.

REFINITIV, Analysis by Kalkine Group 

Valuation Methodology (Illustrative): EV to Sales Based

Analysis by Kalkine Group

Stock recommendation

The company clocked healthy results on the back of strong performance primarily driven by a 32% increase in product sales volume over the comparative quarter due to higher sales of its flagship product, avenanthramides and value driver product, beta glucan. However, on account of higher sales the consolidated receivables for the company increased largely by 69% to CAD 3.6 million, suggesting that it is increasing its volume on lengthy credit period. Moreover, it has a prolonged Cash Cycle (Days), both of these aspects could create a difficulty for the company to have enough cash in hand to meet their financial obligations. Even the technical indicator suggests that stock is perhaps overbought and due for a price correction or a consolidation.

Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock at the last closing price of CAD 0.65 on May 27, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

*The reference data has been partly sourced from REFINITV

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.