Of the total 5100 companies we rank weekly there are only 400 that we consider as viable candidates for investment [and of those only 16 cannabis stocks generate the data necessary to evaluate them properly]. For our purposes today, we ranked those companies on Earnings, Balance Sheet, Relative Valuation, and Risk, with each getting a Composite Average Ranking…
The following scores are substantially different than public perception, which is why I labeled this article “Fact vs. Fantasy.”
1. Based on Composite Ratings, only OrganiGram Holdings (OTCQX:OGRMF) (at 6.25 out of a highest 10 score) and Aphria (at 6) had scores typical of S&P 500 company average performance. The other scores ranged from 3 to 5…
|Average Score||Composite Score Rank||Majors Rank|
|Aurora Cannabis TSX||ACB.TO||4.50||5||5|
|Perrigo Co.||PRGO, PRGO.V||4.50||6|
|Canopy Growth Corp.||WEED.TO||3.00||8||8|
|Green Organic Dutchman||OTCQX:TGODF, TGOD.TO||3.00||9||7|
|Canopy Rivers||OTCPK:CNPOF, RIV.V||3.00||10|
|Emerald Health||OTCQX:EMHTF, EMH.V||3.00||11|
|Supreme Cannabis||OTCQX:SPRWF, FIRE.TO||3.00||12|
|Auxly Cannabis||OTCQX:CBWTF, XLY.V||2.75||13||9|
|Flowr Corp.||OTCPK:FLWPF, FLWR.V||2.00||14|
2. Relative to Earnings, only OrganiGram (10) and Aphria (9) were acceptable on that basis.
|Aurora Cannabis TSX||ACB.TO||1|
|Canopy Growth Corp.||WEED.TO||1|
|Green Organic Dutchman||TGOD.TO||1|
|Canopy Growth NYSE||CGC||1|
3. Based on the Fundamentals strength (based on Profitability (revenue growth, gross and net margin and return on equity), Debt and Earnings Quality (free cash flow, and days of sales in inventory and receivables). the acceptable companies were CannTrust Holdings (9 out of a highest 10) followed by Aphria (8), Aurora Cannabis (8) and OrganiGram (7).
|Aurora Cannabis TSX||ACB.TO||8|
|Canopy Growth Corp.||WEED.TO||5|
|Green Organic Dutchman||TGOD.TO||3|
|Canopy Growth NYSE||CGC||3|
When I hear or read about the grandiose performance these companies are going to have two or three years out, I tune out but, if the Earnings and Fundamentals Ratings are acceptable and improving, then on a trading basis I think the interest level for any company in this industry is justified.
4. Based on Relative Valuation to the broad market, (based on (most importantly) Price-to-Sales plus (equally) Trailing P/E and Forward P/E) none were truly acceptable to conservative investors; however, Canopy Rivers (scoring a 6) came close for consideration. In the case of almost every cannabis company, the valuation multiples were awful.
|Canopy Growth NYSE||CGC||4|
|Aurora Cannabis TSX||ACB.TO||2|
|Canopy Growth Corp||WEED.TO||2|
|Green Organic Dutchman||TGOD.TO||2|
5. Based on Risk, (which looks at 5-year and 90-day stock performance measures, including volatility, magnitude of returns, beta and correlation of returns to the S&P 500) the only acceptable companies were Hexo (8), which was the least risky, followed by CannTrust, Aurora Cannabis and OrganiGram, each of which scored an acceptable 7 out of 10…
|Aurora Cannabis TSX||ACB.TO||7|
|Green Organic Dutchman||TGOD.TO||6|
|Canopy Growth Corp.||WEED.TO||4|
|Canopy Growth NYSE||CGC||2|
…Canada is now in a financial bubble for cannabis…[Once] the U.S. has federally legalized cannabis…the U.S. industry will then see a lot more investment which will flow out of Canada. Soon the world will have legalized cannabis for personal, recreational use or for medical use, and American capitalists will take control.
TGOD (Green Organic Dutchman) is one that will make it and thrive long-term and I own the stock. The only one I own. They have the best grower, solid management and Tim Seymour on their board. HEXO also should be good, but their CEO is terrible. They have a lot of greenhouse capacity that produces bunk weed. HEXO’s value is in its relationships with government and Molson (TAP). They are a take-over target…
Everybody seems to have a different view of cannabis, and many are highly opiniated. For me though, as an investment pro, I just stick to observations and analysis based on Big Data. My bottom line on the subject: most exchange-listed cannabis companies are terrible businesses that I will not invest in. Personally, I’m waiting for the right time to buy put options.