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Which Cannabis Stocks Look Cheap in December?


Dec. 28 2018, Updated 8:57 a.m. ET

A buying opportunity?

December has brought a severe drop in investors’ wealth, which has created a good buying opportunity. The same scenario has played out in the cannabis sector (HMMJ). The industry has been trading at an all-time low valuation, which is usually considered to be an attractive entry point for investors. In this series, we’ll discuss the cannabis stocks on our list that might look attractive at the current levels.

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Sector valuation

In the above chart, you can see that the cannabis industry is trading at an all-time low. The median of nine cannabis stocks, represented by the yellow line, is trading at a forward EV-to-sales multiple of 3.2x—the lowest level since January 2017. The valuation hadn’t ever fallen below 4x until December. The cannabis sector has been weighed down by the bearish sentiment.

Most cannabis stocks including Canopy Growth (WEED) (CGC), Tilray (TLRY), Aurora Cannabis (ACB), and Supreme Cannabis (SPRWF) suffered lately. The relatively higher volatility in the cannabis sector makes the valuation even more sensitive to wild swings in the market. Investors have been jittery about investing in cannabis stocks.

In this series, we’ll discuss each of the nine cannabis stocks that form the median in the above chart.


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