In response to an 11-per-cent share price decline since its March 18 close, Beacon Securities analyst Russell Stanley raised his rating for Green Thumb Industries Inc. to “buy” from “hold.”
“We view GTII as one of the premier companies in the cannabis space, and our prior downgrade was based solely on valuation,” he said. “The company recently reported Q4 results that beat our forecast/consensus, with EBITDA margins improving to 37 per cent, and operating cash flow margins (before working capital) expanding to 23 per cent. Given its strong cash flow profile, we estimate that GTII has $240-million in ‘dry powder’ available for possible M&A activity. With further upside now available to investors relative to our price target, we are reinstating our Buy rating.”
Believing the Chicago-based company’s stock deserves to trade at a premium to its peers, Mr. Stanley maintained a $46 target, which sits below the current consensus of $57.01.
“The stock now trades at 16 times our F2022 EBITDA forecast of $452-million (a shade higher than consensus at $448-million), representing a 12-per-cent premium to the 14 times average at which U.S. operators trade,” he said. “Given GTII’s strong track record on organic growth, EBITDA margins and cash flow production, we continue to believe it deserves a premium multiple of 18.5 times that EBITDA forecast. Potential catalysts include progress towards the issuing of additional retail licenses in Illinois, the Q1 results in May, and additional buildout updates.”