Licensed producer Emblem Corp. (Emblem Corp Stock Quote, Chart: TSXV:EMC) may be a smaller player in the cannabis game but by trading at just 2.8x forward earnings, it’s a valuable pickup, says analyst Neil Maruoka of Canaccord Genuity, who in a Tuesday research update maintained his “Speculative Buy” rating and $2.50 target price for EMC.

Paris, Ontario’s Emblem Corp. posted its Q1/18 financials on Tuesday, coming in with $1.3 million in revenue and an Adj. EBITDA loss of $2.4 million. Those numbers were roughly in line with expectations, says Maruoka, who highlighted the fact that Emblem’s patient base has grown by 22 per cent between the start of Q1 and the end of May.

“While Emblem’s capacity is only expected to be a modest 2,000 kg annualized by the end of this year, production is expected to increase dramatically in Q2 2019 when cultivation begins at the company’s 15,000 kg capacity greenhouse,” says Maruoka.

“We continue to believe that Emblem’s pharmaceutical strategy is a key differentiator. Improved convenience and tighter dosing is likely to reduce the amount of drug required and increase patient compliance. As a result, we believe that Emblem could achieve much higher pricing,” he says.

The analyst has adjusted his estimates to reflect the company’s slower ramp in oil sales, now predicting revenue and Adj. EBITDA in FY2018 at $12.9 million (was $17.6 million) and negative $576,000 (was $3.7 million), respectively, and revenue and Adj. EBITDA for FY2019 at $62.6 million (was $64.7 million) and $18.4 million (was $20.2 million), respectively.

Maruoka says that EMC currently trades at 2.8x two-year forward EV/EBITDA, which compares to its smaller peer group at 6.6x. His $2.50 target represents an EV/EBIDA multiple of 5.8x and comes with a projected 12-month return on investment of 66.7 per cent at the time of publication.