TDR Research Initiating Coverage of Green Thumb Industries
Green Thumb Industries Inc. is a national cannabis retailer and consumer packaged goods company headquartered in Chicago, Illinois. Green Thumb Industries operates 93 retail stores across 14 states and 20 manufacturing facilities. The company offers a diverse range of cannabis products, including flowers, vapes, edibles, pre-rolls, concentrates, and topicals under multiple brands.
We rate Green Thumb Industries as a “Buy” based on our comprehensive analysis of its financial health and growth potential. Our valuation incorporates three key methods: Discounted Cash Flow (DCF) growth, DCF revenue, and EV/Revenue. The blended fair value of the company is calculated to be $19.89, which represents a potential upside of 76% from its current price of $11.29. This significant potential for return is underpinned by the company’s strong financial metrics, including a high current ratio and a lower liabilities-to-assets ratio compared to peers.
Green Thumb Industries exhibits several strengths that enhance its attractiveness as an investment. The company demonstrates strong cost management and profitability, as reflected in its higher-than-average gross profit margin. Additionally, The company has shown strong cash flow management, with a high Levered Free Cash Flow (LFCF) Margin and significant positive change over the last twelve months. These factors contribute to the company’s financial flexibility and ability to invest in growth opportunities, pay dividends, and weather economic downturns.
However, Green Thumb Industries also faces some challenges compared to its peers. The company’s recent and long-term EBITDA growth is below industry averages, indicating areas for improvement in operational efficiency and profitability. The modest improvement in its SG&A margin, contrasted with a higher-than-average increase, further highlights the need for better cost control. Additionally, GTI’s significant investment in capital expenditures (CapEx) suggests a focus on future growth, but careful alignment with strategic objectives is essential to maximize returns.
