Comparing with the median
Let’s take a look at the first four of the nine stocks we’re taking into consideration in this series and consider the industry’s median valuation.
The median EV-to-sales multiple of the cannabis stocks under review stands at 4.95x. Compared to this median, Canopy Growth (WEED) (CGC) is trading at a multiple of 25.4x, Aurora Cannabis (ACB) is trading at 9.9x, Tilray (TLRY) is trading at 52.8x, and Aphria (APHA) is trading at 2.8x. Of these four stocks, except for Aphria, all are trading at premiums to the industry median (MJ).
These stocks’ higher valuation multiples compared to the median don’t necessarily indicate that they’re expensive. Risk and growth are two variables that explain these valuation multiples based on their forecast fundamentals. For Aphria, the recent fall in its stock fueled by short sellers’ attacks has increased its risk perception. It’s somewhat valid to see its valuation multiples below those of its peers given this higher risk perception.
Month-over-month, except for Tilray, all of the remaining three stocks have experienced increases in their valuation multiples largely driven by rises in their stock prices.
Next, we’ll discuss the EV-to-sales multiples of the remaining five stocks that make up the industry median.