Greenlane Renewables Inc. (TSX: GRN.V) is a global provider of biogas upgrading systems. Its systems produce renewable natural gas from organic waste sources including landfills, wastewater treatment plants, dairy farms and food waste, suitable for either injection into the natural gas grid or vehicle fuel. 

Why should Investors make an EXIT?

• Lower margin profile v/s Industry: In Q3 2021, the company failed on maintaining its pace and witnessed lower performance under operating margin matrix, comprising of all gross margin, EBITDA margin and operating margin, which exhibits the extreme pressure on the company.

  Source: REFINITIV, Analysis by Kalkine Group 

• Higher average collection period: GRN is having a higher average Accounts Receivable day of 111.8 days, against the industry median of 38.8 days. A higher average collection period indicates that the organization is collecting its payments at a slower pace. This may create a difficulty for the company to have enough cash on hand to meet their financial obligations.

• Long cash cycle days: The company’s Cash Cycle (Days) has increased compared to the previous sequential quarters, implying the company is taking more days to convert its inventory to cash. In Q3 2021, its Cash Cycle stood at 117.8 days against 114.1 days in Q2 2021.

• Stretched valuations: GRN shares are available at an NTM EV/EBITDA multiple of 29.5x compared to the sector (Energy) median of 5.3x and on NTM Price/ Cash Flow multiple its trading at 19.5x against the sector median of 4.0x. This implies that the shares are overvalued against the industry. Higher valuations against an industry draws a caution line.
  

Stock Recommendation

Greenlane Renewables is a leading global provider of biogas upgrading systems that aid in the decarbonization of natural gas, with a pipeline of active system sales potential totalling over CAD 850 million as of September 30, 2021. Not all of these potential projects will proceed or proceed within the expected timeframe and not all of the projects that do proceed will be awarded to Greenlane, is something suspicious. Furthermore, the company has a long cash cycle days and a higher average receivable day, which could make it difficult for the company to pay its financial obligations. Furthermore, its margin profile is at the lower end of the industry, implying that it is under pressure. It's also trading at various multiples with stretched valuations. Hence considering the above discussed aspects along rationales we recommend “Sell” rating on the stock at the closing price of CAD 1.17 on January 31, 2022.

 One-Year Technical Price Chart (as on January 31, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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