The Canadian cannabis stocks we’ve discovered have high operational efficiencies, as demonstrated by their superior asset turnover ratios
SmallCapPower | November 29, 2018: Operational efficiency is a key aspect of any successful business, and especially so in an industry such as cannabis where superior supply chains are a critical competitive advantage. Operational efficiencies translate into higher productivity – higher revenues and margins – with your asset base. One common ratio used to measure efficiency is the asset turnover ratio, which measures how many dollars of revenue a company generates with a single dollar of assets. Companies generating higher revenues per dollar of assets have a greater probability of also generating higher returns for shareholders. Today, we’ve weeded out three Canadian cannabis stocks with notable efficiencies as demonstrated by their asset turnover ratios.
*Market Cap and share prices as of November 27, 2018. Asset turnover ratios obtained from Capital IQ.
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Plus Products Inc. (CSE:PLUS) – $5.60
Cannabis
Headquartered in San Mateo, California, Plus Products is a manufacturer of cannabis products in the state of California. Plus Products provides consumers with edible products for the medical and recreational markets. The Company offers several lines of gummy products with varying THC:CBD ratios. As such, some of the Company’s products are marketed as “restorative” gummies, others intended for daytime use, and some gummies targeting consumers seeking pain relief. As of September 2018, two of the Company’s edible products ranked in the top 10 selling edibles in California. The Company’s market share has grown from 0.43% in Q2 2017 to 5.31% in Q2 2018, according to the September 2018 investor presentation.
- Market Cap: $135.1 Million
- 1-Month Return: +41.8%
- Asset Turnover: 1.14x
Planet 13 Holdings Inc. (CSE:PLTH) – $2.64
Cannabis
Planet 13 Holdings operates cannabis cultivation facilities and dispensaries across Nevada. The Company has a total cultivation capacity of 2,100 lbs/year from its two cultivation facilities in Las Vegas and Beatty, Nevada. Planet 13 is set to launch its largest dispensary, the Planet 13 Superstore, in November located adjacent to the Las Vegas strip. The dispensary is projected to serve over 2,000 customers daily and will cover more than 40,000 square feet. On November 12, 2018, the Company reported net revenue of US$4.9 million and EBITDA of US$275,568.
- Market Cap: $315.5 Million
- 1-Month Return: +10.9%
- Asset Turnover: 0.98x
Tilray Inc. (NASDAQ:TLRY) – US$114.00
Cannabis
Tilray is a company focused on medical cannabis research, cultivation, and distribution. The Company operates internationally through its subsidiaries in Australia, Canada, and Germany. Tilray’s stock price climbed after it announced on September 13 that it had obtained regulatory approval to export flower-based products to Germany. This supplements the oil-based products Tilray already exports to Germany. The stock has experienced high levels of volatility amidst significant short-selling pressure from notable research firms, including Citron Research. The Company maintains supply agreements with distributors in Argentina, Australia, Chile, Croatia, Cyprus, the Czech Republic, New Zealand and South Africa. Closer to home, Tilray has supply agreements with several Canadian provinces, including the Ontario Cannabis Store.
- Market Cap: US$10.6 Billion
- 1-Month Returns: +25.7%
- Asset Turnover: 0.37x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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