OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
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Chart of the Week
Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Week ended 11/18/2022
Investment Attractiveness – Low Multiples or Better Credit Quality?
- The graph reviews the attractiveness of the top 14 MSO stocks for which analyst estimates are available for 2023 EBITDA.
- In ranking stocks, investors need to balance low multiples with relative safety. Stocks that trade at attractive multiples sometimes do so because they present higher credit risk.
- The orange line on the graph shows each company’s Viridian Capital Advisors credit ranking from 1 to 14 (measured on the right axis), with higher numbers indicating better credit quality according to the Viridian Capital Advisors Credit Tracker Model. For example, Green Thumb (GTII: CSE) ranks 14, indicating that our model ranks it as the best credit in the group.
- The blue line ranks the company’s EV/ Consensus 2023 EBITDA from 1-14 (measured on the right axis), with higher numbers indicating lower (more attractive) valuation multiples. Green Thumb has a rank of 4, suggesting that it is the 4th highest valuation multiple out of the 14.
- The Green bar (measured on the left axis) is the product of the EV/2023 EBITDA rank and the Viridian Credit Score rank. Companies that have both low EV/ EBITDA multiples and high Viridian Credit Tracker Credit ranks will have higher attractiveness ranks.
- According to our analysis, the most attractive two investments are Verano (VRNO: CSE) and Trulieve (TRUL: CSE). Both have reasonable valuation multiples and credit relatively high credit ranks.
- Curaleaf (CURA: CSE), on the other hand, shows up as relatively unattractive because although it ranks as one of the best credit quality companies, it has the highest valuation multiple of the group.
- In the current constrained capital markets, equity investors must pay careful attention to valuation multiples and credit quality. Although the probable passage of the SAFE+ bill is likely to raise the valuations of the entire group, it is wise to consider a continuation of current market conditions
