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Canopy Growth’s Valuations Take a Dive After Earnings Results


Jun. 24 2019, Updated 3:16 p.m. ET

Canopy Growth’s valuations

After Canopy Growth’s (WEED) (CGC) release of its fiscal 2019 fourth-quarter earnings results, its price took an 8% dive as its stock went into correction mode. Naturally, this change had an impact on its valuation.

Fundamentally, Canopy Growth remains a strong contender in the cannabis sector, and the company is deploying capital for future growth. How attractive does the stock look from a valuation standpoint after the sell-off?

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Forward EV-to-sales

Canopy Growth has traded at a forward EV-to-sales multiple of 15.1x on average over the past two years. Just before its earnings, the stock was trading at 20.6x, a premium to its historical average. However, its valuations were cut in half to 10.4x after it released its earnings results.

Another way to look at the difference is that investors paid 20 times for one unit of next-12-month sales for Canopy Growth’s forward sales before its earnings, but investors were only willing to pay 10 times per unit of next-12-month sales after its earnings. Priced into this valuation multiple is a growth expectation of ~224% year-over-year in the company’s top line over the next 12 months.

Canopy Growth’s peer Tilray (TLRY) was trading at a forward multiple of 13.6x, and Aurora Cannabis (ACB) was trading at a forward multiple of 14x.

For a full comparison of how cannabis companies’ valuations stack up, read Cannabis Stocks: Do CTST, HEXO, and IIPR Look Cheap?


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