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Initiating Coverage Of Verano Holdings Corp

By Bill McNarland

TDR Research is initiating coverage of Verano Holdings Corp (CBOE CA: VRNO, OTC: VRNOF) with a “Buy” rating. We have determined a fair value of $10.08, offering a potential upside of 145% from its current price of $4.05. Our estimates for 2024 include a projected revenue of $933.1 million, a gross margin percentage of 51.5%, an EBITDA margin of 29.5%, and an EBITDA of $275.2 million.

The company excels in free cash flow growth, with a significant increase over the last twelve months. Verano’s gross profit margin is above the median and average of its peers, reflecting effective cost management and profitability. The company’s financial stability is also evident in its lower total liabilities vs. assets ratio, indicating better financial health and lower leverage compared to its competitors.

Strengths of Verano Compared to Its Peers

Verano demonstrates strong financial stability with a lower total liabilities vs. assets ratio. The company’s gross profit margin is above the median and average of its peers, reflecting effective cost management and profitability. Verano also excels in cash flow management, with a Levered Free Cash Flow Margin above the benchmark, showcasing its financial flexibility and operational efficiency. Additionally, Verano’s long-term growth rate for EBITDA is significantly above the benchmark median and average, indicating robust operational efficiency and profitability.

Weaknesses of Verano Compared to Its Peers

Verano faces challenges with its current ratio, which is below the benchmark median and average, indicating potential liquidity issues in meeting short-term liabilities. Additionally, the company’s SG&A margin is slightly higher than the median and average, with room for improvement in operational efficiency. Verano’s CapEx Margin is also lower than its peers, suggesting conservative reinvestment that may impact future growth.

Our Forecasts

Based on our analysis, we rate Verano Holdings Corp as a “Buy” with a fair value price of $10.08, offering a potential upside of 145% from its current price of $4.05. This valuation considers the company’s strengths in free cash flow growth and the future catalysts of regulatory changes. These factors indicate a promising return on investment for shareholders. Verano’s strong financial health, effective cost management, and operational efficiency make it a compelling investment opportunity in the cannabis industry.


Bill McNarland

Bill (William McNarland, CFA) has over 25 years of experience in complementary areas of the capital markets, encompassing private equity and credit due diligence, economic and stock research and corporate finance. He has served on the boards of six different companies and has fulfilled roles as a Trustee and member of the Investment Review Committee for regulated investment funds. Having completed nine degrees and designations, with a notable distinction as a Chartered Financial Analyst, Bill is currently advancing his academic pursuits with a Master's in Psychology. Furthermore, he is a published author of seven books, all of which are available on Amazon.