Adamas One Corporation (NASDAQ: JEWL) is polishing itself to become one of the most formidable players in the lab-grown diamond space. And that's no coincidence; it results from JEWL doing the right things at the right time in a booming lab-grown diamond sector. In fact, they are a perfect example of why being different can be an advantage, which, for JEWL, positions them ideally to capitalize on a multi-billion dollar revenue-generating opportunity.
What's attracting investors and consumers to JEWL? Plenty. Foremost, they don't sell diamonds excavated through conflict areas, known as blood diamonds. Nor do they rely on what is often described as slave labor to find stones. And finally, they don't cause environmental havoc on land and resources. In other words, JEWL is the polar opposite of traditional diamond-mining players. But better than different is that there's no possibility of that malpractice seeping into its operations.
Instead, JEWL is committed to creating beautiful stones in an ethically and environmentally friendly way. And in doing so, JEWL is not only changing the synthetic diamond industry for the better, but they are also challenging everything the traditional diamond industry can offer with groundbreaking diamond synthesis processes that produce chemically identical and visually stunning stones indistinguishable from those mined from the earth. Saving lives and resources is inherent to that mission. While that list is impressive, other advantages are attracting diamond enthusiasts, environmentalists, and investors to the Adamas One proposition.
Adamas One Is Shining Bright
For enthusiasts, the most significant attraction to Adamas One's synthetic diamonds is their price point, with its stones often retailing at a discount to their mined counterparts. But paying less doesn't get them less. JEWL's diamonds are top quality, meeting every variable in the 4 C's to the desired degree.
In fact, an intrinsic strength of Adamas One is that it can control productivity, making to-order consumer-grade stones, high-end stones, stones with perfect clarity, and even diamond tools for industrial work. In other words, no matter the client, JEWL can meet demand. And that demand is growing, with interest in synthetic diamonds over traditionally mined stones surging. Of course, that makes sense, considering that Adamas One is creating a lab-grown product that even the most experienced jewelers cannot distinguish from the mined ones. That's, of course, intentional.
Producing these high-quality stones results from JEWL's proprietary Chemical Vapor Deposition process, which creates lab-grown diamonds indistinguishable from mined diamonds in terms of optical, physical, and chemical properties. These high-quality diamonds are more than made environmentally and labor-friendly; they have minimal impurities, facilitating JEWL to produce stones that can meet demand from jewelry, industrial, and other sectors that count on diamonds' hardness and/or beauty for their own initiatives.
Multiple Advantages That Meet Diversified Demand
From that ability to reach different sector demands, JEWL is ideally positioned to tap into the global market for lab-grown diamonds. It was a $22.45 billion revenue-generating opportunity in 2022. But that was last year. Today, and over the next five years, the market opportunity is expected to surge to $37.32 billion. Even that forecast may be conservative, considering the shift in consumer preferences favoring products, including luxury jewelry, produced ethically and sustainably. JEWL checks those boxes and, as importantly, is timely to its opportunities.
Coinciding with its company development, in 2018, a defining moment for the lab-grown diamond market occurred when the FTC expanded its definition of diamonds, definitively recognizing lab-grown gems as equals to naturally mined stones. This validation created a tailwind to already growing demand, which is expected to continue at a 9% CAGR into the decade's end. That's excellent news for Adamas One. And better from a company and investor's perspective, JEWL's impressive IP portfolio could keep competition to a minimum. JEWL's high-tech, proprietary, and scalable process to produce lab-grown diamonds is protected by 36 issued patents, with 28 of those in the United States covering methods to create high-quality, single-crystal lab-grown diamonds for industrial and jewelry applications.
Leveraging their IP value is paying off. JEWL is on pace to score upwards of $12 million in revenues this year. Better still, those revenues should fall fast toward the bottom line from gross margins expected to be in the 70%+ range. EBITDA margins are also impressive, with JEWL expecting 50%+ upon completing its planned expansions and integrating its anticipated acquisition of Flawless Allure Grown Diamonds, LLP.
That deal, once closed, can solidify JEWL's position as a leader in the lab-grown diamond industry by completing its production ecosystem to facilitate end-to-end production, speed of production, and time-to-market. Flawless Allure is one of the industry's top diamond cut and polishers. Thus, once integrated, JEWL transforms into a self-sufficient production machine that can control stone production and turnaround time for cutting and polishing.
JEWL Makes Better Diamonds The Right Way
That matters. Not only from a production and pricing perspective but also from a human one. More than ever, consumers are embracing a change in how the world functions, putting people and the environment over aesthetic desires. These consumers aren't blind to the issues inherent to traditional diamond mining. And it's caused them to turn away from traditionally mined diamonds from areas afflicted with war and human rights violations. In other words, demand is shrinking for stones where cruelty, conflict, and ecosystem damage are part of their bloodline, turning instead to ethically sourced alternatives. That shift in sentiment puts Adamas One in the right market at the right time to fill a market void.
And more than consumers will benefit. Adamas One investors can, too, noting that the company is ideally positioned and capable of doing more than creating decorative, even flawless stones. They can do so with extraordinarily high margins, allowing revenues to fall faster toward their bottom line. Most important to that consideration is that Adamas One is already producing these high-quality stones, meaning that investors positioning into this under-the-radar gem are catching prices that look more like pre-IPO angel investor levels.
In fact, with Adamas One already penetrating markets and generating significant revenues, current prices may be too attractive to ignore. That's despite its over 27% run higher since July. Those investors causing the run bought into an Adamas One that is more than a potential cash-cow company; they bought into a company embracing change with a best-in-class product.
Meeting New World Demand With Real Diamonds
Adamas One has contributed to a market where consumers no longer need to settle for diamond alternatives such as cubic zirconia, which has always carried a certain stigma and generated underwhelming sales at best. That landscape has changed, and with it, the notion that consumers need to settle for replica-line "alternatives." Adamas One's products are not an alternative to diamonds but an alternative production of diamonds chemically indistinguishable from traditionally mined top-quality diamonds. Actually, there are differences in the Adamas One stones, all favorable. Aside from being bloodless, they are more reliably pure, strong, and durable.
That's not all. It can't be overstated that the groundbreaking production processes at Adamas One create synthetic diamonds that are exact comparisons to a diamond's natural formation. More simply, mined diamonds come with shape, color, and clarity uncertainty; Adamas One's don't.
They can create diamonds to their specifications, removing many quality obstacles for diamond distributors. That allows Adamas One wholesale clients to build specific inventories and do so much cheaper. That will enable them to sell these synthetic diamonds at retail for less than their traditionally mined counterparts. Better products, chemically identical, more options, clean production, and better pricing from the top down are making Adamas One diamonds more than a better choice; it's an obvious one that many consumers are making.
An industry survey found that 57% of consumers would prefer a synthetic diamond over a traditionally mined stone, with only 30% choosing the typical diamond and the rest indifferent or unsure of their preferences. That 57%, which is increasing, represents billions of revenue-generating opportunities.
Know This: Synthetic Diamonds Aren't Fake
Some reading this may still perceive an Adamas One diamond as "fake." Emphatically, they're not. They are identical in makeup to mined diamonds, judged by the rule of thumb set in place by the Gemological Institute of America to grade Cut, Clarity, Color, and Carat, and sparkle as bright or brighter than mined stones. Here's another Adamas One value driver. Its synthetic diamonds have a distinct advantage in each category.
For example, a diamond's clarity determines whether any blemishes are visible in the stone at a high level of magnification. Adamas One's production methods remove the risk of flaws caused during the natural diamond formation process, allowing the company to consistently produce beautiful, high-grade diamonds. Furthermore, some colors of natural diamonds, such as pink, are incredibly scarce. Adamas One's production processes allow the company to form diamonds of specific colors to meet this demand where traditional diamond companies are unable.
These Adamas One advantages help carve out market sections that Adamas One can and will exploit. And when it comes to the larger stones that bring higher revenues, they have that market covered as well by being able to produce high-carat natural diamonds, a rarity in the traditional market.
Ethical, 4-C's, And Competitive
All tolled, Adamas One can target diverse market demand, from consumer-grade to flawless to industrial. And that should have the most prominent players in the space nervous, including Anglo American ($NGLOY), LVMH Moet ($LVMUY), DeBeers, Gem Diamonds Ltd ($GMDMF), and Rio Tinto ($RIO). But keep in mind synthetic diamonds' price point and physical advantages over traditional diamonds are just two metrics disrupting the markets.
As consumers become more conscious of the ethical impacts of traditional miners, the diamond trade will draw even more scrutiny. It will add to what many consumers already know- some producers in the diamond trade exploit vulnerable communities and exacerbate violent conflict. Adamas One doesn't.
In fact, Adamas One processes don't wreak havoc on its surrounding ecosystems. Not do they inspire deforestation, pollute nearby water and air supplies, or spread disease by increasing the population of dangerous insects. In other words, in addition to not affecting their work areas, Adamas One is not leaving a carbon footprint that can affect an entire region.
Industrial Diamond Market, Another Value Driver
That applies to its producing industrial diamonds, too. While Adamas One products can certainly sparkle a display case, other applications exist for their diamonds. Demand for diamonds in industrial applications is skyrocketing. These stones are used to build high-quality tools, from precision machine components to optical lenses onboard spacecraft. In 2021, the industrial demand for diamonds was estimated to be a $500 billion revenue opportunity. JEWL can reach that market. That's not all.
Retail is certainly in play, and Adamas One again leverages an advantage. Remember, traditionally mined diamonds are unpredictable in shape, size, color, quality, and other critical factors determining where and how much a stone can be sold. Adamas One isn't constrained by those qualifiers.
Adamas One stones can be formulated to specifically satisfy particular requirements. In an industrial market where consistency and quality are paramount, having that advantage and capitalizing on it can be worth billions.
Adamas One's Sum Of Its Parts Equals Value
Thus, Adamas One delivers a potent total for those who like to appraise on a sum-of-the-parts basis. They produce quality diamonds, meet demand from several billion dollar markets, are socially and environmentally respectful, and can control costs related to production.
While that's plenty to attract interest, the biggest attraction, from an investor's perspective, is that they are already generating millions in revenue. Those numbers, especially when they fall quickly toward the bottom line, make Adamas One an attractive proposition. And with share prices, despite its recent 27% July run, still lacking the value for intrinsic strength and inherent potential, it's one worth seizing.
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