The Canadian marijuana stocks on our list have some of the highest EV/Sales ratios in a sector with lofty valuations
SmallCapPower | January 8, 2018: U.S. marijuana stocks dropped after the Department of Justice recently rescinded Obama-administration rules regarding federal prosecution of cannabis possession. However, Canadian marijuana companies have rebounded as federal recreational legalization in Canada approaches. Today we’ve discovered five Canadian marijuana stocks trading at high EV/Sales multiples in a sector that many believe is already overpriced.
Emerald Health Therapeutics Inc. (TSXV:EMH) – $7.05
Marijuana
Emerald Health Therapeutics is developing production capacity and recently announced a 50/50 joint venture (called Pure Sunfarms) with Village Botanicals for the establishment of a large-scale production facility. Under the agreement, Village provided a 1.1 million square foot green house facility (previously used for tomato cultivation), which will be retrofitted for the cultivation of cannabis. The Company estimates that the initial facility could yield more than 75,000 KG of dried cannabis. The Company also has options to purchase an additional 3.7 million square feet of greenhouse space adjacent to the current facility being built.
- Market Cap – $741.6 Million
- FY2018 EV/Sales – 148.9x
- FY2019 EV/Sales – N/A
- Peer Average FY2018 EV/Sales – 29.6x
- Peer Average FY2019 EV/Sales – 6.6x
- M/M Return – 114.9%
- Median M/M Return – 48.6%
DOJA Cannabis Company Ltd. (CSE:DOJA) – $2.65
Marijuana
DOJA is a BC-based marijuana company. The Company is merging with Tokyo Smoke and receiving a $12.5 million strategic investment from Aphria at $1.39 a share. Under a new name, Hiku Brands Company Ltd., the Company plans to open a 5,000 KG production facility and open seven retail positions across the country.
- Market Cap – $160.9 Million
- FY2018 EV/Sales – 44.0x
- FY2019 EV/Sales – 13.1x
- Peer Average FY2018 EV/Sales – 29.6x
- Peer Average FY2019 EV/Sales – 6.6x
- M/M Return – 122.7%
- Median M/M Return – 48.6%
Cronos Group Inc. (TSXV:MJN) – $9.77
Marijuana
Cronos Group owns and operates two licensed producers of medical marijuana in Canada: Peace Naturals (medical) and In The Zone (recreational). The Company also actively seeks investment opportunities in companies that are licensed under Access to Cannabis for Medical Purposes Regulations (ACMPR) or that are actively seeking a license. In addition, Cronos plans to ramp up production at its Peace Naturals facility from the existing 5,000 KG to 40,000 KG before 2019. Furthermore, the Company formed partnership with Israeli entity Gan Shmuel to set up a low-cost production facility in Israel. The proposed facility is expected to produce 24,000 KG.
- Market Cap – $1,457.8 Million
- FY2018 EV/Sales – 36.9x
- FY2019 EV/Sales – 6.6x
- Peer Average FY2018 EV/Sales – 29.6x
- Peer Average FY2019 EV/Sales – 6.6x
- M/M Return – 136.0%
- Median M/M Return – 48.6%
Canopy Growth Corp. (TSX:WEED) – $32.32
Marijuana
As Canada’s largest publicly-traded cannabis company, Canopy Growth owns and operates several facilities that comprise approximately 500,000 square feet. In addition, the Company owns a variety of diverse brands that include Tweed and Bedrocan. Canopy recently announced the industry’s largest financing to date, a $245 million equity deal with Constellation Brands Inc. (NYSE:STZ), in exchange for 18.9M shares, or 9.9% of the Company.
- Market Cap – $6,146.1 Million
- FY2018 EV/Sales – 25.3x
- FY2019 EV/Sales – 4.8x
- M/M Return – 77.1%
- Peer Average FY2018 EV/Sales – 29.6x
- Peer Average FY2019 EV/Sales – 6.6x
- Median M/M Return – 48.6%
Aurora Cannabis Inc. (TSX:ACB) – $13.04
Marijuana
Aurora Cannabis is a licensed producer and seller of medical marijuana and cannabis oil under the ACMPR. Aurora sells its products over the phone, online or through its mobile app and offers a delivery service to its customers. Currently, the Company is engaged in the construction of its new 800,000 square foot production facility in Alberta called Aurora Sky.
- Market Cap – $5,903.6 Million
- FY2018 EV/Sales – 33.2x
- FY2019 EV/Sales – 1.8x
- Peer Average FY2018 EV/Sales – 29.6x
- Peer Average FY2019 EV/Sales – 6.6x
- M/M Return – 75.7%
- Median M/M Return – 48.6%
Disclosure: Neither the author nor his/her family own shares in any of the companies mentioned above.
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