How Cannabis Stocks’ EV-to-EBITDA Multiples Stack Up

Comparing EV-to-EBITDA

In this article, we’ll look at the forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of nine cannabis companies (HMMJ). The median forward EV-to-EBITDA multiple was 63.2x.

How Cannabis Stocks’ EV-to-EBITDA Multiples Stack Up

Tilray is the outlier again

HEXO’s (HEXO) valuation multiple was right at the median value of 63.2x. The four companies above the median include Tilray (TLRY), which was trading at 781.0x, Aurora Cannabis (ACB) at 99.0x, Cronos Group (CRON) at 66.5x, and Supreme Cannabis (FIRE) at 67.4x. Among these companies, Tilray was a clear outlier once again.

The four companies trading below the median include Canopy Growth (CGC)(WEED) at 62.2x, Aphria (APHQF) at 20.7x, Organigram (OGRMF) at 22.8x, and CannTrust (TRST) at 20.4x.

What changed?

While most of the fundamentals have remained unchanged, Canadian cannabis companies are seeing serious investment from Constellation Brands, Molson Coors, and more recently from Coca-Cola, which has made investors’ estimate of market potential surge. Further, Tilray’s drug approval for clinical trials in the US has made the US appear to be warming up to the cannabis industry. Despite these developments, we caution investors to consider whether they warrant such high valuations relative to the past.

Tilray soared to highs of $300 during the September 19 trading session but dropped to a low of $162 in a matter of one hour. To us, this appears to be more about speculation than investing based on fundamentals.