"Valuations in this sector got to obscene levels, with plenty of top cannabis producers receiving multi-billion dollar valuations on little or no revenue. In fact, given the way accounting standards for agricultural products are set up (and cannabis falls into this category), companies were able to claim the full value of their plants before they were sold, leading to revenue growth numbers that did not move in line with earnings, which have remained negative for many players in this space."
"My top pick in the cannabis sector overall, Curaleaf (OTCMKTS:CURLF) is one of the largest cannabis companies in the world. Operating across the U.S. with a national footprint and scale, Curaleaf is the top multi-state operator (MSO) in the market in my view. With an extensive European expansion platform via Curaleaf International, Curaleaf is well-positioned to take the next step as the market leader in the U.S. cannabis market, should legalization regulations take hold."
The cannabis sector experienced a speculative bubble several years ago that produced extremely high valuations for companies with little or no revenue. Accounting rules for agricultural products allowed firms to record the full value of plants before sale, producing revenue growth that often diverged from persistent negative earnings. After a sector-wide decline, several high-quality cannabis stocks now trade at depressed multiples, presenting long-term opportunities if legalization advances in the U.S. and abroad. Curaleaf ranks as a leading multi-state operator with a national U.S. footprint and European expansion, improving gross margins, rising EBITDA margins, a higher-margin product portfolio, and disciplined management willing to divest underperforming lines.
Read at 24/7 Wall St.
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