By 2025, the cannabis industry in the U.S. could be worth more than $41 billion. That’s more than three times the size it was in 2019 ($13.2 billion). The fast-growing space is a great place to invest if you are looking for growth opportunities…
One standout in the sector is Curaleaf Holdings (OTC:CURLF). With incredible sales growth and operations in nearly two dozen states across the U.S., this company hasn’t been shy about expanding. But is now a good time to invest in Curaleaf, or has the stock’s rapid ascent over the past year made it too expensive? Let’s take a closer look at its numbers and whether it is worth investing in today.
Acquisitions are fueling the company’s growth
What attracts many investors to Curaleaf is the company’s aggressive approach to growing its brand. This month, the cannabis producer announced the opening of its 100th dispensary, located in Jacksonville, Fla. Curaleaf is among the top multistate operators in the country and a great investment if you’re bullish on more states legalizing recreational marijuana.
A year ago, the company completed the acquisition of Cura Partners. At that point, it was only operating in 14 states and had just 53 dispensaries. It closed on another big acquisition in July 2020, bringing Grassroots into the fold, which brought its total number of states to the current 23.
All that wheeling and dealing has helped the company significantly grow its top line. When Curaleaf reported its third-quarter results on Nov. 17, its sales of $182.4 million for the period ending Sept. 30 were up 195% year over year. On a pro forma basis, including the revenue of Grassroots for the full quarter, that number would have been $215.3 million, or 18% higher.
Acquisitions are key to the company’s growth, especially since it’s not possible to move pot across state lines as long as marijuana remains illegal in the U.S. under federal law. Although Curaleaf’s cash balance of $84.6 million as of the end of Q3 isn’t going to be enough to make any big buys, its strong share price could help fund more acquisitions in the future. In the past year, shares of Curaleaf are up 180%, dwarfing the Horizons Marijuana Life Sciences ETF and its 61% returns during that time.
But is there more growth possible from here?
How Curaleaf’s valuation compares to its peers
Because many cannabis companies are not profitable, the price-to-sales (P/S) ratio is key to comparing them. Curaleaf is profitable at an adjusted EBITDA level, but the company is still in the red in terms of its net income. Here’s how Curaleaf stacks up against rivals Trulieve Cannabis, Acreage Holdings, and Planet 13 when comparing their forward P/S multiples…
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