The Cheapest Cannabis MSOS To Own, According To Viridian Capital Advisors
Cannabis Cultivation and Retail sector stocks are historically cheap; however, many carry a financial risk that is too high for all but the most intrepid investors.
We took the 45 U.S. Cultivation & Retail companies in the Viridian Value Tracker database. We filtered out 14 with less than a $10M market cap and 11 with no analyst coverage to arrive at a group of 20 well-known cannabis companies.
The graph depicts the Viridian Credit Ranking of each company in the red. Lower rankings indicate better credit quality. The black line shows the midpoint of credit rankings. Companies where the red extends above the black line, have lower-than-average credit quality.
The green area shows the company’s EV/2023 EBITDA multiple ranking. The smaller the height of the green, the lower the valuation multiple relative to the group.
The graph is arranged in order of increasing combined credit and valuation ranking. Investors should want the lowest total ranking. For example, Vext Science VEXTF ranks as the third strongest credit, and its EV/2023 EBITDA multiple of 3.63x is the third lowest of the group. On a combined basis, this makes Vext the best combination of solid credit quality and low valuation.
Several of the Viridian Credit Model’s best-ranked companies appear on the left side of the graph as well. Green Thumb Industries GTBIF is our best-ranked credit, but its EV/ 2023 EBITDA multiple of 6.08x is the twelfth highest of the group. GTI is a solid overall choice for investors willing to accept a higher valuation multiple in return for greater safety.
Companies on the right of the graph generally have higher than average credit risk without low enough valuation multiples to compensate.
The current environment forces investors to adroitly balance better return potential with higher credit risk, and the graph can be a valuable portfolio management tool.
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker. The tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:
- Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors – from Cultivation to Brands to Software)
- Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)
- Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)
- Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)
- Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)
- Credit Ratings (Leverage and Liquidity Ratios)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.