4 Licensed Marijuana Producers Trading at a Peer Discount

The licensed marijuana producers on our list have cash costs as low as $1.31 per gram

SmallCapPower | March 31, 2017: Today we have identified four licensed marijuana producers (LPs) that are trading below their peer average forward price to earnings (P/E 2018e) of 7.6x. As the cannabis companies race to supply the budding Canadian market, we compare each of these stocks to see who has the lowest production costs per gram of medical cannabis. The low production costs will not only serve as a measure of gross margins, but also inform us of who is best positioned to benefit from a price war for market share.

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Aurora Cannabis Inc. (TSXV: ACB) – $2.58

Aurora Cannabis Inc. is engaged in the production and sale of medical cannabis. The Company’s product types include Tetrahydrocannabinol (THC), Cannabidiole (CBD), indica, sativa and hybrid. Its product range includes BLACK TUSK 2, CHESTER, KAINE and TOWER.

  • Market Cap: $817 million
  • Revenue (2018E): $286 million
  • Expected Price to Sales (2018E): 2.9x
  • Cash Costs (per gram):  $3.95

Canopy Growth Corp. (TSX: WEED) – $10.76

Canopy Growth Corporation, formerly Tweed Marijuana Inc., is a diversified cannabis company. The Company, through its subsidiaries Tweed Inc. (Tweed), Bedrocan Canada Inc. (Bedrocan) and Tweed Farms Inc. (Tweed Farms), is engaged in the business of producing and selling legal marijuana in the Canadian medical market. It is also focusing on producing and selling marijuana in the recreational market in Canada. Its core brands are Tweed and Bedrocan. Tweed is a licensed producer of medical marijuana. Tweed’s commercial license covers approximately 168,000 square feet of its Smiths Falls facility and allows Tweed to produce and sell approximately 3,540 kilograms of medical marijuana per year.

  • Market Cap: $1,740 million
  • Revenue (2018E): 284 million
  • Expected Price to Sales (2018E): 6.1x
  • Cash Costs (per gram): $2.47

OrganiGram Holdings Inc. (TSXV: OGI) – $2.55

OrganiGram Holdings Inc., formerly Inform Exploration Corp., is a Canada-based company, which operates through its subsidiary Organigram Inc. Organigram Inc. is a licensed medical marijuana producer as regulated by Health Canada under the Marihuana Medical Access Regulations (MMAR) of the Government of Canada.

  • Market Cap: $257 million
  • Revenue (2018E): $47 million
  • Expected Price to Sales (2018E): $5.5 million
  • Cash Costs (per gram):  $2.99

Aphria Inc. (TSX: APH) – $6.55

Aphria Inc., formerly Black Sparrow Capital Corp., is a Canada-based company, which is engaged in producing and selling medical marijuana through retail sales and wholesale channels. The Company’s retail sales are sold primarily through the Company’s online store, as well as telephone orders. Its wholesale shipments are sold to other Medical Purposes Regulations (MMPR) Licensed Producers. It offers medical cannabis of various strains, including Kusawa, Tamaracouta, Panache, Churchill and Iroquois. The Company is also engaged in the research and development, and commercial production of cannabis oil.

  • Market Cap: $817 million
  • Revenue (2018E): $149 million
  • Expected Price to Sales (2018E): 5.5x
  • Cash Costs (per gram): $1.31