Expert Says Sustainable Living Stock Is a Steal

Ron Struthers of Struthers' Resource Stock Report shares his belief that all the strong growth and more is already priced into Nvidia. Meanwhile, a deep value situation like Greenbriar Sustainable has been overlooked, according to Struthers, but not for long.

A lot of investors simply jump on momentum, like the recent Magnificent 7. However, the majority get in too late and our left holding the bag when the mania subsides. All eyes are on Nvidia (NVDA:NASDAQ); perhaps they can be called the top gunslinger in the Magnificent 7.

They report earnings after the bell today with a consensus EPS estimate for Q4 coming in at US$4.63 (+426% Y/Y), with a revenue forecast of US$20.5B (+236% Y/Y), up from US$6.1B in the prior year. That is awesome growth, but it is already priced in and much more. When the numbers grow this strong, it is just too hard to repeat from this much higher base in revenue and earnings. For example, for revenue to jump +236% from US$20.5B, it would have to go to over US$48 billion. Not going to happen in the next couple of years for sure.

However, the market is pricing in this spectacular growth into the future. According to marketwatch.com, NVDA has a p/e of 416, trading at 19 times the sale, 22.7 times the book value, and 90.5 times the cash flow.

This is a bubble, sure and simple, and it will pop; maybe it has, but this will happen in 2024.

I pointed out earlier that management/insiders are dumping the Magnificent 7. It was just announced that Jeff Bezos of Amazon just sold another 14 million shares for a total of 50 million.

Where are these guys putting the money?

One place is mining. Meanwhile, a deep value situation like Greenbriar has been overlooked, but not for long.

Greenbriar Sustainable

Recent Price - US$1.00

Entry Price - US$1.15

Opinion - Strong Buy to US$1.25

Investors that know the story of Greenbriar Sustainable Living (GRB:TSX.V; GEBRF:OTC) have been impatient waiting for government approvals/permits, but I said not for long because I have been invited to the sod-turning event for Sage Ranch in April so this is going to happen and soon. So is the construction starting at their Montavla solar project.

Not Greenbriar, but independent third parties have estimated their future cash flow for Sage Ranch and Montavla at US$260 million. I am ignoring Cordero Ranch in Utah because construction is a couple of years out. That third-party estimate is about 11 times the current Greenbriar market valuation.

I also estimated an annual free cash flow of about US$35 million for the two projects. Stocks will normally trade between three and ten times cash flow. At five times, that would put the stock at about US$5.00 or about CA$6.50

Greenbriar just announced a dividend policy where 35% of their free cash flow would go to dividends. Using a more conservative US$30M per year in free cash flow, we can value the future stock price on dividend yield. To be conservative, let's use an even US$10m for dividends annually. That would be about US$0.29 per share each year in dividends. If the stock gave a yield of 7%, the stock would be US$4.15 or CA$5.50.

A target of CA$6 for 2025 looks quite realistic. That might seem too bullish, but ask yourself, why would the former CEO of JP Morgan Securities, Chris Harvey, come on as a director of a little unknown micro-cap company like Greenbriar?

I bet it is because he sees the huge potential. You can make five or ten times your investment on Greenbriar, and you cannot do that now with the Magnificent 7; that ship has sailed.

Chris began his career at JP Morgan 39 years ago and helped build out the firm's overall investment banking capabilities. After several roles and then spending several years as the Chief Country Officer for Japan, Chris then ran the Wealth Management business for Latin America, with his final position as the CEO of JP Morgan Securities for four years.

Sven Vande Broek has a European newsletter and just wrote a very in-depth analysis of Greenbriar. I have known Sven for several years through email, and he has graciously shared his report. You can view the complete 24-page analysis here.

I would like to show one graphic from the report because it gives a timeline for when Greenbriar starts to generate revenue, which will be in 2024. Sage Ranch will come on in phases over six years, so it will generate revenue in that time frame. Montavla, a solar farm, will be much quicker as it takes about six to 12 months to build a solar farm of this size (80MW). It will then start generating its full yearly revenue over the next 25 years, the planned life span. It could go longer, and there is potential to expand this to up to 160MW, so revenues would double.

Like Canada, the U.S. faces a shortage of affordable homes, and Greenbriar is a solution for this. For those familiar with mining, Greenbriar has gone through the slow process of permitting that investors find boring, but the inflection point has arrived where they start producing revenue, just like when a mine building is finished. These stocks then see a large move higher as they start to trade at a multiple of earnings and cash flow. The chart is also quite interesting.

The stock started to come down in mid-2022, but since that time, it has been under strong accumulation, shown by the positive balance volume. That means more buyers taking out offers than sellers hitting bids. Insiders have bought about 90,000 shares so far in 2024. The first resistance is $1.25, and that is my short-term target. Once there, some positive news should take it to the next level.

Midnight Sun

Recent Price - US$0.29

Entry Price - US$0.27

Opinion - Buy on weakness