Weekly Valuation Tracker
Viridian highlights a specific industry sector and provides a deep dive into valuation metrics and comparable company valuations for public companies operating in that sector. The Weekly Valuation Tracker provides proprietary, actionable valuation data.
Weekly Valuation Report – Large Canadian LPs (market caps over $25M)
- Earlier in the week, the Viridian Credit Tracker ranked these companies by credit quality. Now, we review the group’s valuation metrics.
- The ten companies in the group trade at a median market to tangible book value of .96x, EV/2024 Revenues of .43x, and EV/2024 EBITDA of 5.55x.
- The medians conceal tremendous variation within the group. For example, Cronos’s (CRON: Nasdaq) valuation metrics are difficult to interpret. The company trades at .81x market to tangible book. However, its net cash exceeds its market cap, producing a negative enterprise value. Its EV/Revenue and EV/EBITDA stats are, therefore, meaningless. Looking at the quartiles on EV/2024 EBITDA, we see that 25% of the companies trade at less than 1x 2024 EBITDA, while 25% trade at more than 17x 2024 EBITDA. This tells us that, for half of the group, EBITDA multiples are outside the realm of everyday reality.
- Canopy (CGC: Nasdaq) is another company whose valuation is difficult to understand. The company trades at over 3x revenues despite a chronically negative EBITDA. Much of the value of the company may lie in its unconsolidated investments in U.S. subsidiaries. If that is the case, then revenue and EBITDA multiples are, at best, misleading.
- So, what valuation metrics are we to hang our hat on for this group?
- The IQR/Median ratio is an excellent statistic to look at to see which valuation measures are most tightly grouped around the median. In this group, the market-to-book ratio appears to describe the data most closely. The median market-to-book ratio of .87x seems to be the single best valuation yardstick for the group.
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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.
Weekly Sector Valuation Report – Cultivation and Retail Sector
- We find the Cultivation and Retail segment valuation metrics to be confounding. Of the 36 companies with 2024 analysts’ estimates, the median EV/ 2024 Revenues is 1.15x, and the median EV/ 2024 EBITDA multiple is 6.20x. While these are not the lowest measures in history, they continue to be inexplicably low, given the regulatory progress towards S3, the re-emergence of SAFER Act discussions, and the fact that both candidates are supportive of further liberalization of cannabis laws. The debt market gets it. Lenders, including commercial banks, are becoming more aggressive, but equity investors are lagging.
- Trump’s positive remarks produced a temporary blip, but cannabis was missing as a debate topic, sending the sector right back into the doldrums.
This Chart is Only Available to Higher Tier Memberships
Please Purchase a Premium or Enterprise membership to see more.
Weekly Sector Valuation Report – Cultivation and Retail Sector
- We find the Cultivation and Retail segment valuation metrics to be confounding. Of the 36 companies with 2024 analysts’ estimates, the median EV/ 2024 Revenues is 1.15x, and the median EV/ 2024 EBITDA multiple is 6.20x. While these are not the lowest measures in history, they continue to be inexplicably low, given the regulatory progress towards S3, the re-emergence of SAFER Act discussions, and the fact that both candidates are supportive of further liberalization of cannabis laws. The debt market gets it. Lenders, including commercial banks, are becoming more aggressive, but equity investors are lagging.
- Trump’s positive remarks produced a temporary blip, but cannabis was missing as a debate topic, sending the sector right back into the doldrums.
