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Are Cannabis Stocks Trading Cheap?

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Cannabis stocks

Earlier in this series, we discussed how the average forward EV-to-sales multiple of nine Canadian cannabis (MJ) stocks were trading at an all-time low of 4.6x. Let’s look at each of the nine cannabis stocks that are part of the average multiple below.

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Comparing the industry

Four stocks in the above chart are clearly trading above peers’ median of 4.6x, while four are trading at a discount to the median. OrganiGram (OGRMF) was trading right at the median at a forward EV-to-sales multiple of 4.6x. However, OrganiGram was trading at a discount to its level a month ago at 6.11x.

Four stocks were trading at a premium to peers’ median. Tilray (TLRY) was trading at a forward multiple of 67.3x but at a discount to its level a month ago at 74.2x. Canopy Growth (WEED) was trading at a premium to peers’ median at 19.2x but at a discount to its multiple at 21.0x last month. Cronos Group (CRON) was trading at a multiple of 25.0x and at a premium to its level at 15.7x last month. Aurora Cannabis (ACB) was trading at a premium to peers’ median at 8.5x but at a discount to its level at 10.1x last month.

Recently, Cronos got a boost from Altria’s 45% acquisition, which boosted the valuation multiple.

The stocks that traded at a discount to peers’ median include CannTrust (CNTTF) at 3.6x, HEXO (HEXO) at 3.2x, Aphria (APHA) at 2.6x, and Supreme Cannabis (SPRWF) at 2.3x. All of these stocks traded at a discount to last month’s level, which indicates that they’re relatively cheaper.

Next, we’ll discuss the EV-to-EBITDA multiple.

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