Surna Stock (OTCMKTS:SRNA) A Bargain At Current Levels

A second consecutive quarter of record revenue and profits and it is safe to say things are looking rosy for Surna stock. Surna stock has bounced back nicely and recouped a substantial amount of the losses on the way.

Surna Stock Price Analysis

After a wave of consideration, the upward momentum looks set to pick up some steam as investors react to improving fundamentals. Revenue growth and profitability are some of the factors that continue to affirm the company’s long-term prospects.

In addition, the company’s cash position has improved considerably in recent months. That said, the company remains well-positioned to pursue strategic initiatives that have the potential to accelerate revenue growth as well as create value for shareholders.

With the stock trading at the lower end of a tight trading range, a bounce-back could be in the offing in continuation of the emerging uptrend. Conversely, a rally followed by a close above the $0.09 level should help fuel the upward momentum setting the stage for the stock to continue powering higher.

That said Surna needs to rally and find support above the $0.10 level to be on its way to registering one-year highs. Conversely, a breach of the $0.06 level could give short sellers a reason to continue pushing the stock lower in continuation of the long-term downtrend.

In our view, Surna is on its way to powering higher in continuation of the emerging uptrend.

About Surna Stock

Surna designs, engineers and manufactures environmental control and air sanitation systems used in regulated indoor cannabis cultivation facilities across the U.S and Canada. The company provides energy and water-efficient solutions that allow growers to meet the demand for active cannabis cultivation. The company has so far played a role in the commissioning and operation of over 800 grow facilities.

Improved Operational Efficiency

Surna sentiments in the market have received a boost on the company reporting impressive financial results for its third quarter. Revenues in the quarter were up 66%, surging to another record high of $5.5 million. The increase stems from two expansion project contracts that the company signed in the second quarter with a single multi-facility.

The company also achieved back-to-back quarters of positive operating and net income. Operating income in the third quarter surged to $277,000 as net income came in at $222,000. Cash levels in the quarter increased to $2 million as the company generated $1.75 million from operating activities in the first nine months of the year.

Tony McDonald, the Company’s CEO, stated: “We are extremely pleased with our second straight quarter of record revenue and profits. We continue to focus on our two key financial metrics: revenue growth and profitability

However, gross margins in the quarter shrunk to 28.6% from 34.4% reported in the second quarter. The decline was because of the company taking advantage of larger project opportunities that included a high proportion of nonproprietary products

Strategic Plans

In a bid to accelerate growth and generate long-term value, Surna management has already identified new business verticals that should help complement the company’s climate control business. The verticals include the automation of processes for delivering nutrients and water to plants as well as the development of systems for optimizing the use of growing space.

The company is also thinking of developing cultivation management technology. To achieve the new business verticals, Surna intends to ink strategic partnerships with like-minded companies and businesses. The company is also considering the possibility of carrying out acquisition in a bid to achieve some of the verticals.

“Under the right circumstances and at the appropriate time, we believe acquisitions and related capital infusions of growth equity, combined with the proper execution of our growth plan, can accelerate our progress towards consistent cash operating profitability,” Surna in a statement.

Listing on the NASDAQ is another milestone that Surna management wants to achieve in the coming years.

Bottom Line

After a poor start to the year, Surna stock has bounced back nicely. Improved operational efficiency has seen the company post impressive financial results in recent quarters. A second consecutive quarter of record profit and revenues attests to a company firing on all angles. 

With the company having uncovered new business verticals expected to generate long term value, the stock is trading at a discount relative to its long term prospects. As it stands, Surna stock is a great pick for long-term investors.

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Disclosure: We have no position in Surna stock and have not been compensated for this article.