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Cronos Group’s Valuation after Its 1Q Earnings

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Valuations

Cronos Group (CRON) stock has taken a hit of ~8% after its first-quarter earnings. As a result, the valuation multiples will likely be impacted. Cronos Group had been trading at a premium to its peers, which also concerned analysts. Let’s look at how the company’s valuation stacked up after its earnings.

EV-to-sales multiple

Cronos Group’s forward EV-to-sales multiple fell from 28.9x before its earnings to 27.6x after its earnings—a drop of 4.6%. Looking at the above chart, Cronos Group continued to trade higher than its peer median multiple of 5.8x. The peer median multiple includes Canopy Growth (WEED), Tilray (TLRY), and Aphria (APHA). They were trading at forward multiples of 22.9x, 11.7x, and 2.9x. Compared to these stocks, Cronos Group looked relatively expensive.

We also compared Cronos Group’s current multiples to its historical levels over the past two years. Cronos Group averaged 22.1x over the past two years, which indicated that the current levels looked a little stretched. However, Cronos Group’s fundamentals did undergo significant changes over the past two years. Altria’s investment was one of the biggest changes. On May 9, while Cronos Group lost 8%, the ETFMG Alternative Harvest ETF (MJ) lost 1.9%.

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