The Canadian cannabis stocks on our list trade at the strongest price/cash flow multiples in the sector
SmallCapPower | August 7, 2018: As a young industry, many cannabis producers are currently producing at a significant loss as they scale up production. Significant investments in increasing production and other infrastructure may pay off as companies begin to sell to the recreational market and recoup their costs. The five Canadian cannabis stocks we have discovered today have attractive price/cash flow multiples for the current fiscal year, suggesting that they represent better value than other stocks in the sector.
Village Farms International Inc. (TSX:VFF) – $5.18
Fishing & Farming
Village Farms International is a leading large-scale and low-cost greenhouse grower of agricultural products. The recent formation of the 50/50 joint venture, “Pure Sunfarms,” with Emerald Health Therapeutics, Inc. (TSXV:EMH) has transformed the company into a low-cost, licensed cannabis producer with a capacity of 4.8M sq. ft, with a yield of up to 300,000kg. Village Farms is currently utilizing 225,000 sq. ft. of one of its three BC facilities, and recently received its sales license for the facility.
- Market Cap: $230.4M
- Price to Cash Flow FY2018: 40.1x
- 1 Month Total Return: -15.9%
- 3 Month Total Return: 0.6%
Aphria Inc. (TSX:APH) – $10.49
Aphria is Canada’s third-largest cannabis producer by licensed capacity. The Company’s Leamington greenhouse facility provides them with the opportunity to be a scalable, low-cost producer of medical marijuana. By January 2019, Aphria expects to increase its total licensed greenhouse growing space to 1,000,000 sq. ft., increasing its annual production capacity from 9,000 kilograms to 100,000 kilograms. The Company currently has 44,000 sq. ft. of production space. On June 6, 2018, the Company announced the construction of a $55M cannabis extraction centre, expected to process 200,000kg/y. On the same day, APH announced a $225M private placement at $11.85/share.
- Market Cap: $2,451.9M
- Price to Cash Flow FY2018: 71.3x
- 1 Month Total Return: -11.6%
- 3 Month Total Return: 6.6%
Sunniva Inc. (CSE:SNN) – $5.70
Cannabis & Healthcare Facilities
Sunniva is a Canada-based cannabis producer of medical marijuana. The company is vertically integrated with operations divided between production, clinics, and paraphernalia. SNN currently has more than 100,000 patients registered in its clinics and recently entered a deal with Canopy Growth Corp to supply 45,000 kg/annum for two years to Canopy’s distribution network. The company is currently expanding its existing facility and constructing a second that it hopes will yield a combined 200,000 kg/annum by 2020.
- Market Cap: $182.8M
- Price to Cash Flow FY2018: 72.3x
- 1 Month Total Return: -29.2%
- 3 Month Total Return: -34.8%
Harvest One Cannabis Inc. (TSXV:HVT) – $0.66
Harvest One Cannabis is a producer of medical marijuana licensed under the ACMPR. The Company’s production subsidiary currently produces 1,000 kg/y at its BC facility, and plans add a further 10,000 kg/y at two new facilities in BC and Saskatchewan. Satipharm, its distribution subsidiary, produces cannabis-based microgel capsules, primarily for distribution in Europe.
- Market Cap: $133.7M
- Price to Cash Flow FY2018: 104.6x
- 1 Month Total Return: -14.3%
- 3 Month Total Return: -25.8%
Isodiol International Inc. (CSE:ISOL) – $3.25
Isodiol International specializes in the production of pharmaceutical and consumer products with a focus on cannabidiol (CBD) nutraceuticals that are derived from hemp. Isodiol manufactures over 30 different products using 99.5%+ purity pharmaceutical grade cannabinoids, which it distributes domestically as well as globally. The Company’s diverse product portfolio includes nutraceuticals, clinically proven anti-aging skin care and beverages.
- Market Cap: $128.8M
- Price to Cash Flow FY2018: 116.3x
- 1 Month Total Return: -31.6%
- 3 Month Total Return: -61.8%
Ubika Research/SmallCapPower has received compensation from Isodiol International to provide analyst research coverage. For full disclosure please visit here >>.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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