Examining the Cannabis Breakout Stock Solis Tek Inc (OTCMKTS:SLTK)

Examining the Cannabis Breakout Stock Solis Tek Inc (OTCMKTS:SLTK)

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Solis Tek Inc (OTCMKTS:SLTK) is a micro-cap player in the equipment and supply arm of the Canadian pot production juggernaut. The stock that has grabbed hold of the attention of traders during its recent move, which appears to be actively evolving into a breakout toward new all-time highs. Hence, we thought it would be a good time to take a fresh look at the name.

The stock’s principal catalyst in recent action is clear: as with any company intimately tied to Canadian cannabis cultivation, the big driver is the legislative push to fully legalize pot on a recreational level in Canada, nationwide. Unless you’ve been living under a rock, you know that this has been slated for midway through next year. The other key catalyst here for SLTK is its recent financial report. We will take a look at the numbers – good ones – below. But first, let’s take a birds’ eye view of the company.

Solis Tek Inc (OTCMKTS:SLTK) frames itself as a company focused on the research, design, development and manufacturing of advanced, energy efficient greenhouse indoor horticulture lighting and ancillary equipment.

SolisTek’s vision is to apply the latest advances in high-efficiency lighting and controls technology as well as effective manufacturing techniques to deliver highly differentiated products with clear benefits at competitive prices to the greenhouse and indoor horticulture markets.

According to company materials, “Solis Tek Inc. is an importer, distributor, and marketer of digital lighting equipment for the hydroponics industry with specific focus on the research, design, development and manufacturing of advanced, energy efficient indoor/greenhouse horticulture lighting and ancillary equipment. Using its proprietary technologies, the Company provides innovative aptitudes with its ballast, reflector and lamp products. The company’s vision is to apply the latest advances in high efficiency lighting and controls technology as well as advanced manufacturing techniques to deliver highly differentiated products with clear benefits at competitive prices to the greenhouse and indoor horticulture markets. The Company’s customers include retail stores, distributors and commercial growers in the United States and abroad.”

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As noted above, SLTK put out some pretty positive financial numbers in recent weeks.

Suffice it to say, the company reported record revenues for 2016, raking in sales of about $8.5 million. That’s up about 11% when compared to revenue of $7,713,456 in 2015.

Gross profit for the years ended December 31, 2016 and 2015, was $3,123,859 and $2,719,036, respectively. The gross profit increase of $404,823 or 15% was primarily due to the increase in revenue.

Incoming CEO, Dennis G. Forchic, commented “Throughout 2016, Solis Tek’s revenues reached record levels as more states embraced legalized cannabis sales, driving commercial demand for indoor lighting equipment for cannabis cultivation. In addition to securing repeat sales from existing clients, we were pleased to sign new sales agreements with leading industry players such as DNA Genetics, a cultivator of diverse cannabis strains which has won 150 plus industry awards, and GrowBlox Sciences, Inc., a pioneer in the research and development of pharmaceutical-grade, cannabinoid therapies. GrowBlox Sciences, Inc. adheres to strict regulatory and safety standards to support its clinical trials and securing them as a client highlights our credentials as the industry-leading supplier of high quality, premium lighting products for cannabis cultivation. Our reputation for developing highly differentiated lighting products supported by unique and advanced technologies was further demonstrated when we won the DOPE Industry Awards for Best Lighting Company. We expect the ongoing evolution of the legal cannabis market to mobilize a growing network of credible producers of regulated, high quality cannabis which will continue to drive demand for our diverse range of ballasts, lamps and other lighting equipment throughout 2017.”

Recent action has seen 16% tacked on to share pricing for the name in the past week. The situation may be worth watching. SLTK is a stock who’s past is littered with sudden rips. Furthermore, the company has benefitted from a jump in recent trading volume to the tune of just shy of 210% beyond its prior sustained average level.

It pays to take note of this fact with the stock trading on a float that is extremely small at just 2M shares. This type of thing is something to watch out for: with such a tight trading float, this kind of ramping interest can force a supply-shock squeeze.

At this time, carrying a capital value in the market of $50.4M, SLTK has a chunk ($276K) of cash on the books, which must be weighed relative to about $287K in total current liabilities. SLTK is pulling in trailing 12-month revenues of $8.6M. In addition, as covered above, the company is seeing solid top line growth, with y/y quarterly revenues growing at 11%. We will update the story again soon as further details emerge. For continuing coverage on shares of $SLTK stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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