The Canadian marijuana stocks we’ve dug up are all trading at low EV/Funded Capacity ratios
SmallCapPower | November 1, 2018: Today we look at three Canadian cannabis stocks trading at low Enterprise Value to Funded Capacity ratios. Enterprise Value measures the market value of a firm’s operating assets and is calculated as market capitalization plus net debt. Funded Capacity refers to expected future production for which funding has been secured. Thus, looking at the Enterprise Value to Funded Capacity ratio provides us with a metric to help value cannabis companies. Lower ratios indicate a more attractive valuation for investors. The Canadian marijuana stocks we’ve weeded out are all significantly lower than the average ratio of $13/gram, according to the Eve & Co. investor presentation. Note: All metrics reflect closing prices as at October 30, 2018.
Aleafia Health Inc. (TSXV:ALEF) – $2.00
Aleafia Health is involved in the production and sale of cannabis products, as well as consultation services to determine the suitability of the Company’s products for treating various chronic conditions. Aleafia operates 22 referral-only medical cannabis clinics across Canada, assisting over 50,000 patients to date. In addition, the Company expects its annual cannabis production capacity to hit 38,000 kg by 2019. On September 4, 2018, Aleafia received a sales license from Health Canada. Then, on October 9, 2018, the Company received Health Canada approval for an outdoor cultivation facility in Port Perry.
- Market Cap: $289.4 Million
- 3 Month Return: +198.5%
- EV/Funded Capacity: $2.66/gram (using production capacity of 98,000 kg)
Organigram Holdings Inc. (TSXV:OGI) – $5.30
Based out of Moncton, New Brunswick, Organigram produces and distributes cannabis products for the Canadian medical and recreational markets. It offers a range of products including flowers, oils, and vaporizers. The Company markets its products based on the strains – including Sativa and Indica – as well as the relative THC and CBD content. According to the Company’s latest investor presentation, Organigram’s average selling price was over $7/gram, while all-in cost of production was below $1/gram. Organigram has a fully-funded expansion plan totaling 473,228 square feet. Through partnerships, the Company also has exposure to international medical markets, including Australia and Germany.
- Market Cap: $682.6 Million
- 3 Month Return: +6.4%
- EV/Funded Capacity: $5.54/gram (using 2019 production capacity of 113,000kg)
Eve & Co Inc. (TSXV:EVE) – $0.26
Operating through its Natural MedCo Ltd subsidiary, Eve & Co is a premium female-focused brand with a 200,000 sq. ft. facility in southwestern Ontario. The Company provides educational and online support for its customers to destigmatize cannabis use among women. The Company’s brand centers around female empowerment and leadership and is Canada’s first female-founded licensed producer. On September 18, 2018, the Company announced a supply agreement with Newfoundland Labrador Liquor Corporation. During its most recently-reported quarter, Eve & Co said it received amended licenses from Health Canada under the Access to Cannabis for Medical Purposes Regulations for the sale of certain medical cannabis products and the production of bottled cannabis oil. The Company expects to have a production capacity of 50,000 kg annually by 2020.
- Market Cap: $60.6 Million
- 3 Month Return: +33.3%
- EV/Funded Capacity: $1.23/gram (using 2020 production capacity of 50,000 kg)
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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