Home Cannabis Cannabis Stocks: Analyzing the Valuations

Cannabis Stocks: Analyzing the Valuations


Previously in this series, we discussed that cannabis stocks (MJ) sold off in December due to broader market pessimism. The valuations were pushed into the oversold territory.

Valuation multiples

In the above chart, you can see the median forward EV-to-sales multiples for nine cannabis stocks listed in the footnotes. The stocks include Canopy Growth (WEED), Aurora Cannabis (ACB), Tilray (TLRY), and Aphria (APHA).

In December, the forward EV-to-sales multiple for the cannabis peers (represented by the yellow line) reached at an all-time low compared to the period since January 2017. The forward EV-to-sales multiple reached a low of 2.97x in December—compared to the last two low points, which were well above the 4x level.

In January, investors flocked back to cannabis stocks and valuations started moving up. As of February 6, the peers’ median stood at 5.3x.

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If we take the average of the peers’ median since January 2017, it was ~7.5x. Compared to the past two-year average, cannabis stocks appear to have some more room for upward momentum.

Next, we’ll compare the peers’ median with the valuation multiples for each of the individual stocks.

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