OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
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Valuation Tracker By Industry Sector
Valuation Tracker By Sector
The Viridian Value Tracker is the most comprehensive valuation product in the industry.
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- A broad set of 12 valuation measures assures applicability, regardless of whether the company has analyst coverage or revenues. The typically presented EV/ Projected Revenues and EV/ Projected EBITDA are available for less than 1/3 of the cannabis companies we track.
- Most valuation studies present only the average valuation measures, while the Tracker goes one step further and shows the distribution of values (the quartiles, median, and dispersion) for each measure. This gives users a more complete view of how companies in the cohort group are valued.
Week ended 06/21/2024
Sector Valuation Report
- The Cultivation and Retail segment has clearly seen some uplift since the August 30 HHS announcement that it was recommending S3. But two metrics still concern us. The median market-to-book ratio for the 83 sector companies is now .31x, and the median market-to-tangible book value is -.12x. If we saw those numbers in other industries, our read would be that significant asset writedowns, especially goodwill writedowns would be forthcoming.
- Is this the case in cannabis? Indeed, we realize that due to 280e, most cannabis companies have never made net income, and their book value has eroded over time. But that would seem to argue for a higher market to book rather than a lower one.
- What is the market telling us with a .3x market-to-book ratio? Theory tells us that if ROE is less than the required return on equity, the company should trade at a discount to book. A number this low speaks of skepticism that even after 280e is gone, companies will not earn their required rates of return. We would love to hear other explanations from our readers. Please shoot them in!
Week ended 06/21/2024
Sector Valuation Report
- The Cultivation and Retail segment has clearly seen some uplift since the August 30 HHS announcement that it was recommending S3. But two metrics still concern us. The median market-to-book ratio for the 83 sector companies is now .31x, and the median market-to-tangible book value is -.12x. If we saw those numbers in other industries, our read would be that significant asset writedowns, especially goodwill writedowns would be forthcoming.
- Is this the case in cannabis? Indeed, we realize that due to 280e, most cannabis companies have never made net income, and their book value has eroded over time. But that would seem to argue for a higher market to book rather than a lower one.
- What is the market telling us with a .3x market-to-book ratio? Theory tells us that if ROE is less than the required return on equity, the company should trade at a discount to book. A number this low speaks of skepticism that even after 280e is gone, companies will not earn their required rates of return. We would love to hear other explanations from our readers. Please shoot them in!
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