Initiating Coverage: Green Thumb Industries

We are initiating coverage on Green Thumb Industries (GTI) with a “Buy” due to its strong balance sheet, consistent multi year growth, and significant spending on capital expenditures that should drive future revenue growth.

Strengths of Green Thumb Industries

Green Thumb Industries demonstrates solid financial health, with a current ratio of 2.40, significantly above the median and average of its peers, indicating excellent liquidity and the ability to meet short-term obligations effectively. The company’s total liabilities vs. assets ratio of 31.6% is well below the benchmark, suggesting strong financial stability and lower risk of insolvency. GTI’s gross profit margin of 50.5% shows efficient cost management, slightly above the median and average of its peers. Furthermore, GTI’s substantial investment in capital expenditures, with a CapEx margin of 15.7%, highlights its commitment to expanding operational capacity and positioning for future growth.

Weaknesses of Green Thumb Industries

While Green Thumb Industries shows solid financial health, there are areas for improvement. The recent EBITDA growth of 8.0% is below the median and average of its peers, indicating room for enhancing operational efficiency. The company’s levered free cash flow margin, at 6.0%, is slightly below the median and significantly below the average of its peers, suggesting potential for better cash flow management. Additionally, the increase in SG&A margin over the last twelve months, contrasted with the decreasing trend seen in its peers, points to a need for further operational improvements.

Our Forecasts

Based on our analysis, we rate Green Thumb Industries as a “Buy” due to its strong financial health and growth potential. The blended fair value of GTI is calculated to be $19.89, offering a potential upside of 76% from its current price of $11.29.