Initiating Coverage on Glass House Brands

By Bill McNarland

We are initiating research coverage on Glass House Brands (GHB) with a Hold rating. This decision is based on a comparative analysis of the company against its peers and will be revisited at the next earnings report in August. GHB, operating in California’s competitive market, has shown substantial growth, nearly doubling its stock value in the past year. Although the company’s market capitalization is high comparatively, we expect its future progress to justify this valuation in the future. We will monitor the company’s performance against its stock price, which may lead to a rating change to Buy.

Summary of Estimates

We estimate revenue of $217 million in 2024 and project GHB’s gross margin ratio to rise to 50.1%. This results in an EBITDA margin estimate of 9.5% and a full-year 2023 EBITDA estimate of $20.62 million. Despite GHB’s stock price increase over the past year, we have a fair value price of $12.85 based on a blended valuation.

Strengths Compared to the Benchmark

GHB has several strengths over its competitors:

  • The company has shown strong revenue growth, indicating high market demand for its products.
  • The company has significantly improved its gross profit margin in the LTM, reflecting better cost management and profitability.
  • Ongoing capital expenditures demonstrate a commitment to long-term growth and capacity expansion.

Weaknesses Compared to the Benchmark

However, the company faces some weaknesses:

  • The stock price already reflects much of the recent progress, potentially limiting short-term gains.
  • The balance sheet shows a higher credit risk than peers, which could affect future financial stability.
  • Levered free cash flow as a percentage of revenue lags behind competitors, indicating room for improvement in cash flow management.

We may increase our rating to Buy if the company continues to improve its performance at a pace that surpasses the gains already reflected in its stock price, especially compared to its peers.


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.

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