The Canadian marijuana stocks we’ve dug up are trading well below the industry average multiples of 44.6x forward revenue and could be primed for an upside move
SmallCapPower | November 28, 2018: Concerns over high valuations and cannabis supply shortages have caused pullback in Canadian cannabis stocks over the past month. The big players such as Canopy Growth Corp. (TSX:WEED), Aurora Cannabis Inc. (TSX:ACB) and Aphria Inc. (TSX:APHA) have declined -4.1%, -2.5% and -15.8%, respectively. Forward enterprise value to revenue is a useful metric to a stock’s value for early-stage companies that have not achieved positive cash flows. In the Canadian cannabis space, the average forward EV/Revenue multiple is 44.6x. Today we have weeded out five Canadian marijuana stocks that are trading below 10.0x forward revenues, well below their peer averages.
Note: Metrics are as at closing prices on November 26, 2018.
Harvest One Cannabis Inc. (TSXV:HVT) – $0.42
Harvest One Cannabis is a licensed marijuana producer that operates three subsidiaries: United Greeneries, Satipharm and DREAM WATER. United Greeneries operates the Company’s two production facilities located in British Columbia and Saskatchewan with a current production capacity of 1,000 kg/year. Satipharm, its distribution subsidiary, is producing cannabis-based microgel capsules for distribution in Europe and Australia. Finally, DREAM WATER produces single-use liquid and powder supplements for use in the sleep market.
- Market Cap: $76.5 Million
- 1-Month Total Return: -28.8%
- 3-Month Total Return: -44.0%
- EV/Forward Total Revenue (2019): 0.8x
- EV/Total Revenue (Last Twelve Months): 21.3x
HEXO Corp. (TSX:HEXO) – $5.67
HEXO is a Canadian cannabis producer, operating a 50,000 sq. ft. grow facility in Quebec. The Company differentiates itself through its commitment to natural growth techniques and a focus on customer service. Current operations produce 3,600 kg of cannabis per year. The Company is the only licensed producer of the Decarb product line, a powder medical marijuana that offers consumers a safe and easy way to consume cannabis. On October 31, 2018, HEXO acquired a 2,000,000 sq. ft. facility in Belleville, Ontario as part of the Company’s national expansion strategy. The facility will be used as an R&D and manufacturing centre.
- Market Cap: $1,123.4 Million
- 1-Month Total Return: -2.24%
- 3-Month Total Return: +7.18%
- EV/Forward Total Revenue (2019): 8.22x
- EV/Total Revenue (Last Twelve Months): 176.7x
WeedMD Inc. (TSXV:WMD) – $1.42
WeedMD is a Canada-based licensed producer of medical marijuana. It operates a 26,000 square foot production facility in Aylmer, Ontario and recently leased a 395,000 square foot greenhouse in Strathroy, Ontario. The Company expects to increase its production capacity to over 33,000 kg/year (1,500 kg/year currently) by the end of 2018. Its products include: Dried Cannabis, Cannabis Extracts and Cannabis Vaporizes. On November 13, 2018, the Company acquired a license from Health Canada to sell cannabis cultivated at its greenhouse facility in Strathroy. The license will allow WeedMD to transport cannabis from its Strathroy greenhouse to its Aylmer, Ontario facility for packaging and distribution.
- Market Cap: $158.0 Million
- 1-Month Total Return: -5.96%
- 3-Month Total Return: -14.5%
- EV/Forward Total Revenue (2019): 8.24x
- EV/Total Revenue (Last Twelve Months): 27.0x
Sunniva Inc. (CSE:SNN) – $4.42
Sunniva is a Canada-based cannabis producer of medical marijuana. The Company is vertically integrated with operations divided between production, clinics, and paraphernalia. The Company is currently expanding its existing facility and constructing a second that it hopes will yield a combined 200,000 kg/annum by 2020. On November 27, 2018, Sunniva announced the acquisition of LTYR Logistics, a California-based cannabis distribution company headquartered in San Diego. The acquisition will play a vital role in Sunniva’s goal to become a vertically-integrated cannabis company within California.
- Market Cap: $161.0 Million
- 1-Month Total Return: -8.3%
- 3-Month Total Return: -33.7%
- EV/Forward Total Revenue (2019): 8.45x
- EV/Total Revenue (Last Twelve Months): 8.32x
The Supreme Cannabis Company (TSXV:FIRE) – $1.55
Supreme Cannabis is a Canada-based licensed producer of medical marijuana. The Company’s primary asset is 7ACRES, which currently operates a 40,000 sq. ft. facility that produces 13,330 kg per year. The Company is also developing a 342,000 sq. ft. facility at 7ACRES that anticipates 50,000 kg of annual production. On November 14, 2018, the Company announced record revenues for Q1/2019 with $5.14 million in revenue, a 229% increase year over year.
- Market Cap: $438.6 Million
- 1-Month Total Return: -1.22%
- 3-Month Total Return: -8.82%
- EV/Forward Total Revenue (2019): 9.41x
- EV/Total Revenue (Last Twelve Months): 35.3x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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