Today, cannabis is on the verge of mainstream acceptance and legalization. Cannabis stocks like Tilray (TLRY), Aphria (APHQF) and Canopy Growth Corporation (CGC) have seen their stock prices skyrocket in recent months. However, many investors are overlooking a lesser-known leader: GW Pharmaceuticals plc ADR.
The “yahoo finance” is a company that has been around for over 40 years. They are an undervalued leader in the cannabis industry.
Inflation in the United States just reached its highest level in 30 years.
Inflation increased by 4.3 percent in the 12 months ended in August, according to the latest current figures. That’s the highest reading since George H.W. Bush was president in 1991, more than 30 years ago.
Inflation is projected to continue high in the future.
Treasury Secretary Janet Yellen predicts that prices will stay high until the middle of 2022. Many other well-known economists and experts predict that inflation will continue to rise for years.
Investors looking to beat inflation could choose one of the most undervalued cannabis companies on the market. This is due to the fact that value equities have a track record of outperforming during times of rising inflation.
The Wall Street Journal has some further information.
When the cost of living rises, many people consider stocks of any kind to be a bad investment since the last time inflation was a serious issue in the United States—from the late 1960s to the early 1980s—they went nowhere and lost money in real terms. Companies with actual assets, loans that are reduced by inflation, and the capacity to increase prices, on the other hand, may and have done well during periods of high inflation.
Even when they didn’t, value stocks outperformed their peers in terms of relative performance. During periods of strong inflation, such as the 1940s, 1970s, and 1980s, value stocks outperformed growth. According to data from experts, decades with minimal inflation or deflation, such as the 2010s, 1930s, and 1990s, witnessed the opposite tendency.
Cannabis companies are often thought of being growth stocks by most investors. That is true because cannabis firms in the United States are experiencing revenue growth that is unrivaled by any other sector.
Cannabis stocks, on the other hand, have dropped precipitously in 2021, putting several of them deep into value territory. As a result, many of the most promising cannabis companies are also good buys.
A Cannabis Stock with Exceptional Value
One early industry leader stands out among the bunch.
This particular stock…
- is one of the most undervalued cannabis stocks in the United States.
- has a price-to-sales ratio of 2.5, which is much lower than its competitors.
- In the second quarter, revenue increased by 123 percent.
Cresco Labs (OTC: CRLBF) is one of the top cannabis firms in the United States and a pioneer in the cannabis sector. Cresco, based in Chicago, Illinois, with a market capitalization of $2 billion and a remarkable track record that includes:
- ten states of operation
- There are 20 manufacturing facilities.
- There are 47 retail licenses available.
- There are 40 dispensaries that are privately operated.
Cresco has seen significant revenue growth. Cresco is one of the fastest-growing cannabis firms in the sector, according to second-quarter figures released in mid-August. The highlights of the news release are shown below.
- Revenue increased 17.7% quarter over quarter and 122.8 percent year over year to $210.0 million.
- Gross profit, excluding fair value markup for purchased inventory, was $107.0 million, or 51.0 percent of sales, increasing 22.2 percent from the previous quarter and 233.3 percent from the previous year.
- Net Income1 of $2.7 million, up $26.8 million from the previous quarter and $44.4 million from the previous year.
Cresco’s revenue growth is one of the reasons to admire it. Cresco, on the other hand, stands out even more for investors wanting to beat inflation. Cresco is selling at a significant discount to its peers in the cannabis business and other growing areas.
Cresco has a price-to-sales ratio of 2.5, which is much lower than the industry average.
- The P/S ratio of Curaleaf Holdings (OTC: CURLF) is 6.7.
- The P/S ratio of Green Thumb Industries (OTC: GTBIF) is 6.8.
Cresco appears even better when compared to growth companies outside of the cannabis industry.
Tesla (NASDAQ: TSLA) has a P/S ratio of 25, for example. Cresco’s stock would be worth roughly $75 if it had a P/S ratio of 25.
Cresco is a good value company because of its lower P/S ratio. And, historically, value equities have outperformed during times of rising inflation.
Cresco’s stock is down 50% from its 52-week high.
Cresco has performed poorly in the overall cannabis market in 2021, despite its outstanding revenue growth and inexpensive valuation. The stock is now selling at a 50% discount to its 52-week high. Take a look at the graph below for more information.
Cresco Labs (CRLBF), Curaleaf Holdings (OTC: CURLF), and Green Thumb Industries are among the companies in which author Michael Vodicka has stock (OTC: GTBIF).
Author Bio & Cannabis Stock Trading
Michael Vodicka is a stock analyst with over 20 years of trading and investment expertise. His work has been published in some of the industry’s most prestigious journals. Since 2013, he has been investing and directing investors in the cannabis industry.
Members of Cannabis Stock Trades benefit from Mr. Vodicka’s knowledge and advice.
Join Cannabis Stock Trades for unique research, trade alerts, and a model portfolio from Mr. Vodicka.
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