Home Cannabis How Aurora Cannabis's Valuations Compare to Its Peers'

How Aurora Cannabis’s Valuations Compare to Its Peers’

Valuations

Investors use valuation multiples as a gauge to determine the value of a stock. Investors closely track these multiples to make entry and exit decisions on stocks.

Let’s look at how Aurora Cannabis’s (ACB) valuation compares to its peers’.

1 Forward EV-to-EBITDA Multiple for Cannabis Companies 2019-01-19

Aurora versus peers

In the chart above, we’ve compared Aurora Cannabis’s EV-to-EBITDA (enterprise value-to-EBITDA) to those of its peers Canopy Growth (WEED), Tilray (TLRY), and Aphria (APHA). Aurora Cannabis’s most recent valuation multiple is trading at a discount to its peers (HMMJ) Canopy Growth and Tilray.

On January 18, Canopy Growth was trading at an EV-to-EBITDA multiple of 110.9x, Aurora Cannabis was trading at a multiple of 34.2x, and Tilray was trading at a multiple of ~700x. On the other hand, Aphria (APHA) was trading at a discount of 12x to the peer median of 17.7x on the day.

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The above valuation multiple takes into account a company’s current EV over its forward EBITDA estimate. Increased leverage makes a stock risky, so it demands a higher return, which will eventually lead to a lower valuation multiple, indicating that investors are pricing in the risk of leverage through higher returns.

For more updates, visit Market Realist’s Healthcare page.

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