Green Thumb Industries trades at a 70% discount to its peers: Beacon Securities

Following the previously announced acquisition of For Success Holding Company, Beacon Securities analyst Russell Stanley is maintaining his bullish stance on Green Thumb Industries (Green Thumb Industries Stock Quote, Chart CSE:GTII).

This morning, GTII announced it had closed the pickup of For Success Holding Company, the Los Angeles-based creator of the lifestyle suite of Beboe-branded cannabis products.

“The meticulously-crafted suite of Beboe products supports the premium segment within GTI’s brand portfolio and is firmly aligned with our long-term growth strategy,” CEO Ben Kovler said. “Beboe has an extremely talented team, a robust innovation pipeline, an aligned vision on the future of cannabis and a ground-breaking partnership with Barneys New York. We are thrilled to have the visionary Beboe team officially on board with GTI.”

Stanley says that while the acquisition is not considered material, it is a nice pickup for a company he feels is trading at a steep discount to its peer group.

“GTII now trades at approximately 12x our 2020E EBITDA estimate, representing a 47% discount to the 23x average for the broad peer group, and a 70% discount to the 41x average amongst companies with a C$1B+ market capitalization,” the analyst says. “We believe the closing of this transaction is a strong indicator of GTII’s ability to expand in multiple states while building brand awareness. We continue to view GTII as a compelling investment opportunity given its strong and growing presence in attractive US states, and demonstrated success in its acquisitions (including its recent acquisition of Advanced Grow Labs (AGL)). Additional potential catalysts include closing of the acquisitions in Nevada (Essence) and New York, additional licensing wins, and the Q4/18 results in April.

In a research update to clients today, Stanley maintained his “Buy” rating and one-year price target of $44.00 on Green Thumb Industries, implying a return of 136 per cent at the time of publication.

Stanley thinks GTII will post Attr. EBITDA of negative $5.2-million on revenue of $61.2-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $62.1-million on a topline of $229.5-million the following year.