Village Farms' Cost Discipline Pays Off: Can Margins Keep Improving?

Village Farms International’s VFF third-quarter 2025 performance highlights how sustained cost discipline and operational efficiency are generating stronger margins. The quarter reflected a continuation of several initiatives centered on lowering production costs, improving yields and maintaining tight control over operating expenses.

Consolidated adjusted EBITDA from continuing operations reached $20.7 million, representing 31% of sales, compared with $4.7 million, or 8.5% of sales, in the prior-year quarter. Management attributed this improvement to disciplined execution across the platform rather than short-term pricing benefits. Operating cash flow also strengthened significantly to $24.4 million, underscoring improved cost absorption and efficiency.

Cost discipline was most evident within the Canadian cannabis business. Gross margin in the segment expanded sharply to 56% from 26% a year ago, driven by improvements in operating efficiency, lower costs of production and a favorable mix shift toward higher-margin international export sales. 

Management specifically cited higher productivity, improved crop yields, lower packaging inputs and ongoing continuous-improvement initiatives as key contributors. These efforts helped Canadian cannabis adjusted EBITDA increase 306% year over year to $19.3 million, or 41% of segment sales.

During the third-quarter earnings call, management stated that cost control is embedded in the company’s operating culture and maintained its gross margin target range of 30%-40% over the long term. Overall, Village Farms’ third-quarter results illustrate how consistent cost discipline, efficiency gains and operational focus are reshaping its margin profile.

What the Latest Metrics Say About Village Farms

Village Farms, which competes with The Scotts Miracle-Gro Company SMG and Mission Produce, Inc. AVO, has seen its shares soar 383.3% in the past year, outperforming the industry’s decline of 11.8%, the Zacks Consumer Staples sector’s growth of 2.5% as well as the S&P 500’s 21.8% increase. Meanwhile, shares of Scotts Miracle-Gro have declined 10.2%, while Mission Produce rose 1.5% in the aforementioned period.

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From a valuation standpoint, Village Farms’ forward 12-month price-to-sales ratio stands at 1.6, lower than the industry’s 2.05. VFF carries a Value Score of C. Village Farms is trading at a premium to Scotts Miracle-Gro (with a forward 12-month P/S ratio of 1.03) as well as Mission Produce (0.7). 

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The Zacks Consensus Estimate for Village Farms’ current and next financial-year bottom line implies year-over-year growth of 165.6% and 14.3%, respectively.

Village Farms currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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