In the previous part, we compared the median EV-to-sales multiple for the cannabis sector following recent gains in the stocks. In this part, we’ll discuss how some of the cannabis stocks compare with the peers’ median. We’ll compare with their respective valuation levels since our last update on January 18.
Forward EV-to-sales multiple
In the above chart, you can see that the peers’ (which include nine cannabis stocks) median forward EV-to-sales multiple rose slightly as of February 6 to 5.3x from 4.9x since our previous update on January 18.
Except for Aphria (APHA), all three of the stocks in the above chart were trading at a premium to the peers’ median. Canopy Growth’s (WEED) (CGC) median increased from 25.5x to 26.6x. Aurora Cannabis (ACB) saw its valuation multiples increase from 9.9x to 10.6x. Aphria’s multiple increased from 3.2x to 4.7x. In contrast, Tilray’s (TLRY) valuation multiple declined from 52.7x to 50.0x during the same period.
Aphria changed its course after defying the short sellers. Expanding on the discussion about what drove the gains in these valuation multiples, it was mainly the gains in the enterprise value through gains in the share price. In the EV-to-sales valuation multiple, when the numerator rises, the valuation multiples also rise. Since our last update, there was a modest upward revision in cannabis companies’ (HMMJ) sales estimates.
Next, we’ll discuss the EV-to-sales multiple for the other five cannabis companies.