uploads///Forward EV to Sales

Does HEXO Look Cheap after Recent Sell-Off?

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Apr. 22 2019, Published 8:09 a.m. ET

Valuations

Cannabis stocks have experienced a steep sell-off in April. Aphria (APHA), Cronos Group (CRON), and Tilray (TLRY) have lost about 18%, 15%, and 25%, respectively, during the month. In contrast to these stocks, HEXO (HEXO) was in the positive territory with a gain of 2% in the current month. Let’s see whether HEXO looks attractive from a valuation perspective.

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EV-to-sales

HEXO was trading at a forward EV-to-sales multiple of 5.4x, which was very close to the peer median of 5.7x. As the above chart shows, HEXO has traded very close to the peer (HMMJ) median, which indicates that the stock is fairly valued compared to its peers. In comparison, Canopy Growth was trading at 21.0x, Aurora Cannabis was trading at 14x, and Tilray was trading at 12x. Over the past two years, HEXO has traded at an average of 5.8x.

HEXO’s forward EV-to-EBITDA multiple is 25.0x, which is a premium to peers’ median of 20.7x as of April 18. HEXO has historically traded at an average of 31.5x over the past two years. The EV-to-EBITDA multiple suggests the stock is trading at a premium.

However, when compared to the company’s historical average, the stock’s multiple was trading at a discount.

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