Initiating Coverage: NewLake Capital Partners
We are initiating coverage on NewLake Capital (Ticker: NLCP) with a buy rating. New Lake Capital is a small-cap stock, that specializes in cannabis real estate and is currently traded on the OTCQX market with a stock price of around $20.28 and a market cap of approximately $409 million. As a REIT, NewLake has garnered attention with an impressive annual revenue growth rate of 59.5% over the past three years and shows no signs of slowing down. The company’s performance is further enhanced by its high gross margin of 98.6% and a strong dividend yield of 8.1%.
NewLake Capital stands out in the small-cap stock market for its strong financials and its unique position in the cannabis sector. The company’s business model operates on a simple yet efficient premise where it serves as a landlord to cannabis operations, offering real estate solutions that are both strategic and lucrative.They take in the money from the cannabis companies and manage it. The company takes a narrow, thin charge for doing that.
The financial health of NewLake is a significant part of its appeal. The company boasts $40 million of leveraged free cash flow in the last 12 months, which is incredible for creating that much gross margin profit. We analysts say the rule of thumb is that many companies want to get the 50% gross marginal profit. They’re at 98.6%, which shows how strong their business’s cash flow is.
As a REIT, NewLake also offers an attractive dividend profile, an attractive factor for many investors. The dividends are strong, at 8.2%, and the growth rate adds to its allure. The dividend growth last year was 5.13%, bringing it to 13.3%, which highlights the significance of NewLake’s return to its shareholders.
NewLake’s impressive metrics are further backed by a credit score of 11.6 and a tangible book value per share of $18.77. These figures underscore a financial solidity that makes NewLake an appealing small-cap stock for investors looking for growth and stability in the cannabis market. The projected expansion of the cannabis industry at an annual rate of 10.5% over the next decade only enhances the potential upside for the company’s stock.
NewLake Capital exemplifies a promising investment in the small-cap stock market, particularly within the REIT sector. Its strategic focus on cannabis real estate, combined with exceptional financial health and a compelling dividend yield, makes it an attractive option for both seasoned and new investors. Want to keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.
