Recent data from Viridian Cannabis Deal Tracker highlights significant changes in the valuation multiples of major multistate operators (MSOs) in the cannabis industry.
The Viridian Cannabis Deal Tracker has become an indispensable tool for companies, investors and buyers in the cannabis industry.
With its comprehensive database tracking more than 2,500 capital raises and 1,000 M&A transactions totaling more than $65 billion since 2015, it offers vital market intelligence for strategic decision making.
Increase in market value by 39%.
Over the past year, most of the 14 major cannabis companies have seen their market value increase relative to expected earnings.
A year-over-year comparison from April 14, 2023 to April 12, 2024 reveals an overall increase in enterprise value relative to Consensus Next Twelve-Month (NTM) EBITDA multiples for most of the top 14 MSOs analyzed.
Eleven of these fourteen companies saw their valuation multiples increase, with increases ranging from 3% to a notable 70%.
As a group, these cannabis companies have seen their overall market value increase by 39%, indicating that they are now valued higher than their future profits.
This growth led the group’s aggregate EV/NTM EBITDA multiple to expand from 6.13x to 8.53x.
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Analyze shifts
Shifts in valuation multiples can be attributed to an increase in enterprise value (EV), a decrease in EBITDA, or a combination of both, showing a higher valuation trend for the same level of earnings.
The analysis showed that the overall increase in the group’s EV/EBITDA was due to a significant 37.9% increase in enterprise values, while EBITDA estimates decreased slightly by 0.9%.
This indicates a market tendency to value a static amount of EBITDA at a higher rate.
Future potential versus current earnings
Particularly noteworthy are companies like Curaleaf CURLY and Schwazze SHWZwhich saw pure multiple expansion despite flat or declining EBITDA estimates.
This suggests that investors are weighing future potential over current earnings.
On the other hand, companies like GTI GTBIF and Cresco CRLBF showed both EBITDA multiples and estimates rising, highlighting strong fundamentals and growth potential.
Anticipation of cannabis rescheduling has been a significant driver of multiple expansions, with the expectation that a greater portion of EBITDA will convert to free cash flow.
However, the report advises investors to keep an eye on EBITDA growth as a key indicator of business health.
According to Viridian, companies showing modest valuation multiples but rising EBITDA expectations, such as Ascend Wellness Holdings, Inc. AAWH and Cresco, may offer attractive investment opportunities in the dynamic valuation landscape of the cannabis sector.
Meet Scott Greiper, founder and president of Viridian Capital Advisors at the upcoming Benzinga Cannabis Capital Conference in Florida on April 16-17. Boasting a 30-year career on Wall Street, Greiper launched Viridian in 2014 as one of the first institutional financial and strategic advisory firms in the legal cannabis industry. The two-day event at Diplomat Beach Resort is an opportunity for entrepreneurs, large and small, to network, learn and grow. Buy your tickets now at bzcannabis.com – Prices will go up very soon!
Photo: image generated by artificial intelligence.