Tilray (TLRY) has exhibited extended weakness for the most part of this year, and the trend did not reverse even after the company reported its earnings. Needless to say, investors were unimpressed with earnings, and the stock saw a sell-off in the following days after it reported earnings on May 14. The ETFMG Alternative Harvest ETF (MJ) declined 6% in May. But does the stock look attractive? Let’s look at what the evaluations say.
For a long time, Tilray’s valuations have been bothersome, and the above chart helps to put our concern in perspective. In the period since Tilray went public, the stock has traded at a valuation multiple far greater than its peers. Plus, the fundamentals for peers were the same or even better for some companies, which makes Tilray’s valuations and the corresponding price levels hard to stomach.
However, the market caught up and rationalized the company’s price, and the valuations followed. In the current month, Tilray’s forward EV-to-sales multiple appeared to be mostly in line with its peers. The company was trading at a forward EV-to-sales multiple of 12.7x, which was at a discount to peers Canopy Growth (WEED), Aurora Cannabis (ACB), and Cronos Group (CRON). These three stocks were trading at forward multiples of 21.6x, 15.1x, and 24.8x, respectively. All these stocks were trading at a premium to the median of 6.9x as well as their respective historical averages.
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While Tilray may look attractive in the current month, we must be cautious, as the fundamentals have been revised lower for Tilray, which could justify the lower valuation multiple.
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Also, in the above chart, Aphria (APHA) was trading at a deep discount at 2.9x compared to the median, while OrganiGram (OGRMF) was trading at a multiple of 6.9x right at the median level.