OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

Credit Tracker By Industry Sector

Credit Tracker By Sector

Credit ratings are not currently available for public cannabis companies leaving companies, lenders and investors with a gap of information. The Viridian Cannabis Credit Tracker fills this gap. The model uses 11 market and financial statement variables to discern 4 key credit factors: Liquidity, Leverage, Profitability, and Size, to provide credit/liquidity analysis for over 370 public Cannabis/Hemp companies.

Week ended 03/15/2024

The Agriculture Technology sector credit profile has remarkable contrasts in credit metrics. On the liquidity front, the current ratio median for the 19-member group at 1.13x is weak but not disastrous. However, when adjusted for the negative free cash flow, the median becomes .11x, which is worrisome. Similarly, the total liabilities to market cap median of 1.22x seems reasonable. However, the cash flow measure of annualized funds from operation to liabilities at -.40x is one of the worst of any sector. It’s a sector of contrasts ranging from solid credits like Scott’s Miracle Grow to disasters like Agrify. The raw numbers make clear that the sector is currently credit-challenged, but a reenergized cultivator customer base should significantly revive the sector’s appeal.

The chart shows that sectors with higher median liquidity scores also tend to have higher median leverage. Perhaps the simplest view of this phenomenon is that companies with low FCF-adjusted current ratios tend to have large negative free cash flows, and that, in turn, makes them poor candidates for leverage.

Week ended 03/15/2024

The Agriculture Technology sector credit profile has remarkable contrasts in credit metrics. On the liquidity front, the current ratio median for the 19-member group at 1.13x is weak but not disastrous. However, when adjusted for the negative free cash flow, the median becomes .11x, which is worrisome. Similarly, the total liabilities to market cap median of 1.22x seems reasonable. However, the cash flow measure of annualized funds from operation to liabilities at -.40x is one of the worst of any sector. It’s a sector of contrasts ranging from solid credits like Scott’s Miracle Grow to disasters like Agrify. The raw numbers make clear that the sector is currently credit-challenged, but a reenergized cultivator customer base should significantly revive the sector’s appeal.

The chart shows that sectors with higher median liquidity scores also tend to have higher median leverage. Perhaps the simplest view of this phenomenon is that companies with low FCF-adjusted current ratios tend to have large negative free cash flows, and that, in turn, makes them poor candidates for leverage.

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