The Canadian marijuana stocks we’ve discovered are trading at a discount to peers based on 2020E EBITDA
SmallCapPower | May 1, 2019: Today we have identified four Canadian marijuana stocks that are trading at a discount on a 2020E EBITDA basis. The 2020E industry average EV/EBITDA multiple is currently 29.9x and the four stocks we identified have an average of 15.9x. A low EV/EBITDA multiple among its peers can potentially mean that a company is undervalued.
*Share prices as at close April 30, 2019, data obtained from S&P Capital IQ
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HEXO Corp. (TSX:HEXO) – $10.99
Cannabis
HEXO produces, markets, and sells cannabis products in Canada. The Company is one of the largest licensed cannabis companies in Canada, operating over 1.8 million sq. ft. of facilities in Ontario, Quebec, and Greece, where it plans to establish a Eurozone processing, production, and distribution centre. On April 24, HEXO increased lock up agreements to over 38% of Newstrike shareholders. HEXO is set to acquire Newstrike Brands (TSXV:HIP) in an all-stock deal valued at about $236M, or $0.46 per Newstrike share.
- 2020E EV/EBITDA: 23.6x
- Market Cap: $2.33B
- YTD Return: 113%
- 30-Day Average Volume: 3,030,00
- 90-Day Average Volume: 3,451,000
Organigram Holdings Inc. (TSXV:OGI) – $10.25
Cannabis
Organigram Holdings is a Canada-based company that produces and sells cannabis oil and dried cannabis through its subsidiaries. Organigram is focused on indoor-grown cannabis for recreational and medical use in Canada. On April 26, OGI announced that it has applied to list its common shares on the NASDAQ. OGI believes that the listing will facilitate increased interest from international investors, especially within the United States.
- EV/EBITDA: 16.2x
- Market Cap: $1.5B
- YTD Return: 72%
- 30-Day Average Volume: 1,321,000
- 90-Day Average Volume: 1,690,000
The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $4.54
Cannabis
Green Organic Dutchman Holdings is a Canada-based cannabis producer with operations spanning from Ontario to Quebec. TGOD has already received the ACMPR cultivation and sales license but its two facilities are currently under construction. The Company aims to be the lowest-cost producer in Canada by accessing the lowest power rates within the provinces in which they operate. The combined production capacity of the two fully funded facilities totals 1,643,600 sq. ft. and is expected to yield 219,000 kg of cannabis flower annually. TGOD also has organic hemp CBD oil operations in Canada, and through its wholly owned subsidiary HemPoland distributes premium hemp CBD oil in the EU. The Company announced on April 26, that HemPoland received an Organic Certification which sets the foundation for its CBD products to be offered throughout Europe. Additionally, on April 30, TGOD announced that its Kelowna-based extraction processing services obtained its organic certification from Pro-Cert Organic Systems Ltd, a certifier of organic, gluten-free, and grass-fed products in North America.
- EV/EBITDA: 10.1x
- Market Cap: $1.2B
- YTD Return: 63%
- 30-Day Average Volume: 2,743,000
- 90-Day Average Volume: 4,452,000
CannTrust Holdings Inc. (TSX:TRST) – $9.68
Cannabis
CannTrust Holdings is a distributor and producer of medical cannabis. With the help of healthcare practitioners, the Company sells dried cannabis and oil extracts to clients. The Company has a 60,000 sq. ft facility, producing 3,600 kg of cannabis annually. The Company received approval in January 2019 from Health Canada to build a 450,000 sq. ft. facility in the Niagara Region of Ontario. CannTrust is funding studies on the effects of cannabis for the treatment of pain, cannabinoid pharmacology, therapy in gut disorders, and the effects of cannabis on breast cancer. In addition, the Company is funding studies on the effects of cannabis and Alzheimer’s disease. On April 22, CannTrust released its operational and financial results for the quarter ended March 31, 2019. TRST stated that it was approaching the stated capacity of 50,000kg per year from the Phase 2 expansion and reported a 96% QoQ increase in production.
- EV/EBITDA: 14.0x
- Market Cap: $1B
- YTD Return: 36%
- 30-Day Average Volume: 1,544,000
- 90-Day Average Volume: 2,050,000
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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