Beacon Securities analyst Russell Stanley likes what he sees in the latest quarterly report from Green Thumb Industries (Green Thumb Industries Stock Quote, Chart CSE:GTII).
Maintaining his “Buy” rating and C$44 target in a client update on Wednesday, the analyst says the way forward for the US cannabis company will likely involve strengthening its presence across a number of key states.
Green Thumb released its Q4 and full year fiscal 2018 financials on Tuesday, featuring quarterly revenue of $20.8 million and an Adjusted EBITDA loss of $12.4 million. (All figures in US dollars unless noted otherwise.)
Stanley says that aside from the top line, which came in slightly above his $20.0-million estimate, he viewed management’s update on the company’s progress as a positive.
“Management continues to see numerous acquisition opportunities,” the analyst writes. “While we cannot rule out expansion into additional states, management’s comments imply that the near-term M&A focus will likely involve strengthening GTII’s presence within its existing footprint. GTII exited 2018 with cash of $146 million and debt of $7 million, and even after funding pending transactions, we believe the company is well capitalized to pursue additional growth opportunities.”
Stanley says GTII is currently trading at a multiple of 13x his 2020 EBITDA estimate, which represents a 38-per-cent discount to the 21x multiple of its broader peer group and a 67-per-cent discount to the 39-per-cent multiple among cannabis companies with a C$1-billion-plus market cap.
“Our 12-month target price represents a potential return- to-target of 126 per cent, making this a compelling entry point for investors,” he adds
The analyst expects GTII to generate fiscal 2019 revenue and Attr. EBITDA of $226.5 million and $38.8 million, respectively, and fiscal 2020 revenue and Attr. EBITDA of $523.5 million and $195.9 million, respectively.