Our optimistic outlook for Medipharm Labs (Toronto: LABS) turned sour after the company reported earnings.

The COVID-19 pandemic has taken a huge toll on many companies. But Medipharm’s troubles are also located up the chain of command. The company took a huge step back in revenue and failed to make a profit for the first time since it went public.

That’s a troubling sign for this small company.

Its quarterly update was all about growth in Australia. However, the average price of its extracts, as well as falling demand, hurt the company’s top and bottom lines. And the company burned through over one-third of its cash reserves.

I’m disappointed in this outcome and don’t foresee an improvement in the second half of 2020. While I like its business model, I’m concerned that management took a turn off the right path. So, we are going to sell our position in Medipharm Labs.

Action to take: Sell Medipharm Labs (Toronto: LABS) at the market price, but use a limit order to do so. We will record a disappointing 70% loss on our position.

If you have any questions, send an email to my team and me at frontline@banyanhill.com.

Good investing,

Matt Badiali
Editor, Front Line Profits