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Arcadia Biosciences: Buy, Sell, or Hold

Consumer products company Arcadia Biosciences (RKDA) has made several positive developments. However, is it wise to buy the stock now, despite the ongoing supply-chain disruptions and input price inflation?

Arcadia Biosciences, Inc. (RKDA) produces and markets innovative, plant-based health and wellness products. The company significantly expanded its distribution of body care products, which bodes well for continued retail growth. However, its forward P/S of 4.13x is 235% higher than the industry average of 1.23x.

The stock has lost 32% over the past six months and 50.2% over the past year. Moreover, concerns over supply chain issues and rising input costs make its near-term prospects bleak.

Here’s what could influence RKDA’s performance in the upcoming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal third quarter ended September 30, 2021, RKDA’s revenue surged 657% year-over-year to $2.38 million. The company’s total assets came in at $59.23 million for the period ended September 30, 2021, compared to $47.35 million for the period ended December 31, 2020.

However, its operating loss for the quarter increased 15% year-over-year to $8.71 million. In comparison, its net loss came in at $2.18 million, compared to $6.39 million in the prior-year period. Also, its loss per share came in at $0.10, compared to $0.60 in the year-ago period.

Low Profitability

In terms of the trailing-12-month asset turnover ratio, RKDA’s 0.25% is 70.8% lower than the industry average of 0.86%. Moreover, the stock’s trailing-12-month EBITDA margin, levered FCF margin, and ROTC are negative compared to positive industry averages of 13.15%, 4.11%, and 7.06%, respectively.

Unfavorable Analyst Estimates

Analysts expect RKDA’s EPS to decrease 325% in the current quarter and 50.8% in the current year. Also, its EPS is expected to remain negative in the current quarter and year.

POWR Ratings Reflect Bleak Prospects

RKDA has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. RKDA has a D grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has an F grade for Stability, consistent with its beta of 1.36. In addition, RKDA has an F grade for Growth. This is justified as analysts expect its EPS to decline in the near term.

RKDA is ranked #22 out of 29 stocks in the Agriculture industry. Click here to access RKDA’s ratings for Value, Sentiment, and Momentum.

Bottom Line

As RKDA could keep losing in the near term due to concerns over high material cost and supply chain disruptions, it is best avoided now.

How Does Purple Innovation (PRPL) Stack Up Against its Peers?

While RKDA has an overall POWR Rating of D, you might want to consider investing in the following Agriculture stocks with an A (Strong Buy) rating: Golden Agri-Resources Ltd (GARPY), Archer Daniels Midland Co. (ADM), and Nutrien Ltd. (NTR).

RKDA shares . Year-to-date, RKDA has gained 43.27%, versus a -10.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.


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