Thinking long-term in terms of investing in cannabis stocks isn’t magic. While past performance isn’t a guarantee of future success, these companies have already found a formula for profitability in an industry that’s still in its infancy…
GrowGeneration (NASDAQ:GRWG), Trulieve Cannabis (OTC:TCNNF) and Innovative Industrial Properties (NYSE:IIPR) all had huge revenue growth in the past quarter. That growth is allowing the three to expand through acquisitions while keeping debt-to-equity levels low.
Their early success will be a big advantage over competitors as more states open up to legalized marijuana sales and the industry expands.
GrowGeneration is living up to its name
Shares of GrowGeneration are up only 3% for the year, sluggish compared to the 91% growth in share price we saw over the same timeframe in 2020. But by looking at the company’s financial fundamentals, it’s not hard to see that the current share price presents an opportunity to get in on a stock that will serve you well for the next decade.
Unlike some cannabis stocks, this one is consistently in the black. The company is the country’s largest seller of hydroponic equipment, with 57 retail outlets and an online superstore. It doesn’t actually deal with marijuana itself, which is why its shares can be sold on the Nasdaq.
In the first quarter, through March 31, the company reported $90 million in sales, up 173% year over year. Net income was $7.7 million, up from a loss of $2 million in the same period in 2020.
GrowGeneration’s equipment is sold to cannabis companies as well as regular consumers, so as more states relax cannabis laws, there’s built-in growth expected. A report by Precision Reports estimated the compound annual growth rate for hydroponic sales to be 6.8% from 2021 to 2024.
GrowGeneration recently increased its guidance to say it expected yearly revenue of $450 million to $470 million, compared to $193 million last year, and adjusted EBITDA of $54 million to $58 million, up from $19.2 million in 2020. It has been actively buying up hydroponic stores, adding 14 in the last quarter, and expects to have 100 stores by 2023.
Trulieve is sticking to a playbook that is working
Shares of Trulieve Cannabis are up more than 8% this year. The company is one of the most profitable cannabis purveyors, posting positive EBITDA for 13 consecutive quarters. The company dominates its home state of Florida, with 86 stores there, and last week, was responsible for 41% of the state’s overall medical marijuana sales in terms of milligrams of THC, 40.5% of the state’s low-THC cannabis milligrams, and 47% of the state’s smokable marijuana sales in terms of ounces.
It appears ready to dominate in Arizona assuming its purchase of Harvest Health & Recreation is approved by Harvest’s shareholders in the third quarter of 2021. Harvest Health is the biggest player in Arizona’s medical marijuana program, with…
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