Buy cannabis stock CannTrust Holdings for a double, Echelon says

Having just announced its pending graduation to the TSX, CannTrust Holdings (CannTrust Holdings Stock Quote, Chart: CSE:TRST) deserves a price bump, says analyst Russell Stanley of Echelon Wealth Partners, who gives TRST a “Speculative Buy” with a projected return of 102 per cent.

Yesterday, Vaughan, Ontario-based cannabis producer CannTrust Holdings announced that it has received conditional approval from the Toronto Stock Exchange to list its shares. Final approval will be subject to CannTrust meeting TSX’s requirements by a TSX-imposed May 21 deadline, including divesting itself of interests in the United States, where cannabis remains federally a Schedule 1 narcotic. CannTrust has stated it will therefore be assigning its interest in the joint venture company Cannabis Coffee & Tea Pod Company to an affiliated company.

CannTrust Holdings stock move to TSX could be a benefit

The move from the Canadian Stock Exchange to the TSX will broaden TRST’s audience, says Stanley.

“While the CSE has gained prominence in part because of the number of cannabis companies listed there, we understand that some institutional investors require a company to have a TSX or TSXV- listing at a minimum. We therefore view this as a positive step for TRST,” the analyst said in an update to clients on Thursday.

“We are leaving our estimates unchanged at this time, but believe the TSX listing warrants a higher valuation multiple,” says the analyst. “TRST currently trades at just under 8x EV/2019E EBITDA based on our estimates vs. the adjusted average for the broad peer group of just under 16x (based on consensus estimates).”

Stanley has upped TRST’s estimated enterprise value/EBITDA multiple from 14.5x to 16.0x EV/2019E EBITDA and increased his 12-month target price from $16.75 to $18.50, representing a 102 per cent return at time of publication.