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Innovative Industrial Properties’ Valuation: Stock Looks Risky

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Jun. 26 2019, Updated 7:40 a.m. ET

Innovative Industrial Properties

Innovative Industrial Properties (IIPR) stock has been hitting higher highs in the past few days. How do the company’s valuations compare to its historical levels and its peers?

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Higher valuations

Innovative Industrial Properties has consistently traded at a premium to the peer median since August 2018. Currently, the company’s forward EV-to-sales multiple is trading at 20x—at a premium to the peer median of 6.6x on June 25. Innovative Industrial Properties traded at a significant premium to its historical average of 11.3x over the last two years.

When a stock trades at a relatively high premium to its peers, it’s considered to be relatively risky. However, when we compare Innovative Industrial Properties with Canopy Growth (WEED) and Cronos Group (CRON), the company’s current valuations look fair. Canopy Growth was trading at a forward multiple of 22x, while Cronos Group was trading at a forward multiple of 27x on June 25.

Innovative Industrial Properties’ EV-to-EBITDA multiple was trading at 17.7x. Compared to the peer median of 18x, Innovative Industrial Properties’ valuation looks fair. Historically, the company has traded at an average of 11.6x. Canopy Growth is expected to have a negative EBITDA over the next 12 months. Canopy Growth’s EV-to-EBITDA multiple isn’t comparable to Innovative Industrial Properties. Cronos Group was trading at a forward multiple of 118.

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