The Canadian marijuana stocks we have selected are trading at an average price-to-tangible book value of 1.5x.
SmallCapPower | November 5, 2019: Price-to-Tangible Book Value is a metric used by investors to determine a liquidation value for a company. In theory, price-to-tangible book value represents the money that an investor would receive for each share if a company were to cease operations and liquidate its hard assets. Thus, price-to-tangible book represents the value of the hard assets of a company. The ratio is calculated as the company’s market cap divided by tangible book value, whereas tangibles book value is the company’s assets minus intangible assets, goodwill, and long-term (LT) debt. Today we have identified four Canadian marijuana stocks trading at a price-to-tangible book value below 2.0x.
*Share price data as at November 1, 2019, data obtained from S&P Capital IQ
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WeedMD Inc. (TSXV:WMD) – $1.14
Cannabis
WeedMD is a Canadian federally-licensed cultivator and distributor of cannabis and cannabis extracts for medical and recreational markets. As of now, the Company owns and operates two licensed facilities: 1) in Aylmer, Ontario, a 26,000 sq. ft. facility and; 2) a 158-acre property located in Strathroy, Ontario, which also includes a 616,000 sq. ft. greenhouse facility. Overall, WeedMD has 136,000 sq.ft of licensed production space with 150,000 kg of fully-funded capacity. Additionally, the Company is expecting to expand its footprint to more than 550,000 sq.ft. of indoor and greenhouse production space by the end of 2019. On October 16, 2019, WMD announced it secured a Health Canada amendment approval for its 50,000 sq. ft processing facility in Strathroy. The Company is also currently harvesting its first outdoor grow. This will be one of the first legal outdoor harvests of cannabis in Canada.
- Market Cap: $130.5M
- 5-Day Return: -5.7%
- 30-Day Return: -17.9%
- Total Assets: $147.8M
- Goodwill: $0.0M
- Intangibles: $0.0M
- LT Debt: $35.5M
- Tangible Book Value: $112.3M
- Price-to-Tangible Book Value: 1.2x
Organigram Holdings Inc. (TSX:OGI) – $4.46
Cannabis
Organigram is a licensed producer of cannabis and cannabis-derived products in Canada for the recreational and medical markets. The Company has a strong brand portfolio that includes The Edison Cannabis Company, Ankr Organics, Trailer Park Buds and Trailblazer. Organigram’s main facility is located in Moncton, New Brunswick. On July 26, 2019, the Company entered into an advance payment and purchase agreement with 703454 N.B. Inc., through which Organigram will pre-fund hemp purchases to receive access to, at most, 60,000 kg of dried hemp flower that is expected to be harvested in Calendar 2019 for extraction into CBD isolate. The Company reported its Q3/19 financial results on July 15, 2019, which showed net revenue of $24.8M through sales of about 5,130-kilogram equivalents. This is down 7.8% when compared to its Q3/18 revenue of $26.9M. Organigram is expected to report Q4/19 results on November 29, 2019. Analysts are expecting EPS of $0.01 on revenue of ~$31.5M for the quarter.
- Market Cap: $696.6M
- 5-Day Return: -6.5%
- 30-Day Return: -1.5%
- Total Assets: $428.0M
- Goodwill: $0.0M
- Intangibles: $1.5M
- LT Debt: $47.2M
- Tangible Book Value: $379.3M
- Price-to-Tangible Book Value: 1.8x
Aphria Inc. (TSX:APHA) – $6.81
Cannabis
Aphria produces and sells medical and recreational cannabis-derived extracts in Canada. The Company currently has a 1.1M sq. ft Leamington greenhouse facility, called Aphria ONE, which yields ~100,000 kg per year. Additionally, the Company has a premium cannabis brand named Broken Coast, produced in a 4,500 sq. ft facility in British Colombia that yields ~7,000 kg annually. Aphria reported Q1/20 financial results on October 15, 2019, before markets opened. Results were highlighted by EPS of $0.07 on net cannabis revenue of $30.8M and net revenue of $126.1M, which was mixed compared with consensus estimates of $131.1M in net revenue and EPS of ($0.03). Management also reiterated F2020E revenue guidance of $650M to $700M and adj. EBITDA of $88M to $95M. On November 4, 2019, the Company announced that it had received a Health Canada cultivation license for its Double Diamond facility in Leamington, Ontario. This adds 1.3M sq. ft of cultivation space with an estimated annual yield of ~130,000 kg, bringing Aphria’s total capacity to 2.4M sq. ft with a yield of ~240,000 kg annually.
- Market Cap: $1,713.1M
- 5-Day Return: 0.0%
- 30-Day Return: -3.8%
- Total Assets: $2,433.6M
- Goodwill: $669.6M
- Intangibles: $388.4M
- LT Debt: $461.4M
- Tangible Book Value: $914.2M
- Price-to-Tangible Book Value: 1.9x
The Supreme Cannabis Company, Inc. (TSX:FIRE) – $0.70
Cannabis
The Supreme Cannabis Company is based in Canada and focuses on selling to the wholesale sector for the medical cannabis market in Canada. Through its subsidiary, 7ACRES, the Company operates a 440,000 sq.ft cultivation facility outside of Toronto. The Company’s portfolio also includes: 1) Blissco Cannabis Corp, a wellness cannabis brand and multi-licensed processor and distributor in British Columbia; 2) Truverra Inc., a global medicinal cannabis brand and licensed cultivator the Company acquired on August 13, 2019; 3) Cambium Plant Sciences, a plant genetics and cultivation company; 4) Medigrow Lesotho, an southern Africa-based cannabis oil producer; 5) Supreme Heights, an investment platform that works on CBD brands in the UK and; 6) a brand partnership and licensing deal with Khalifa Kush Enterprises Canada.
- Market Cap: $247.8M
- 5-Day Return: -11.5%
- 30-Day Return: -38.9%
- Total Assets: $334.8M
- Goodwill: $0.7M
- Intangibles: $24.5M
- LT Debt: $79.1M
- Tangible Book Value: $230.5M
- Price-to-Tangible Book Value: 1.1x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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