uploads///Forward EV to Sales

Analyzing Tilray’s Valuation after Its Q1 Earnings

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May. 17 2019, Published 8:05 a.m. ET

Tilray’s valuation

Tilray (TLRY) stock has been trading at a premium valuation compared to its peers, which doesn’t seem justified. Tilray’s decline seemed imminent—like all stocks that trade at a stretched valuation and experience a decline as the market rationalizes the stock price with its true value. Let’s look at the current valuation after the company reported its first-quarter earnings.

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EV-to-sales multiple

Tilray was trading at a forward EV-to-sales multiple of 12.7x, which was significantly lower compared to the peak of 106x on October 16, 2018. Back then, the company’s stock price closed at $166. Tilray’s multiple has averaged 5x.2x since the company went public last year in August. Tilray closed at $47.6 on May 16, while the ETFMG Alternative Harvest ETF closed at $33.9.

Compared to the peer median, Tilray has traded at a significant premium in the past. The peer median averaged 6.9x during the same period. As of May 16, the peer median multiple was trading at 6.7x.

Included in the peer median, Canopy Growth (WEED) was trading at a forward EV-to-sales multiple of 21.9x. Aurora Cannabis (ACB) was trading at a forward multiple of 15.2x, while Cronos Group (CRON) traded at a forward multiple of 25.6x. All of these companies are trading at a premium to Tilray due to their higher growth expectations.

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