Cannabis Chart Of The Week: How Much Are U.S. MSOs Undervalued Compared To Other Industries?
The chart shows Enterprise Value to 2024 consensus EBITDA multiples on the vertical axis against 2023-2025 Revenue CAGR on the horizontal axis for thirteen different industries.
We last explored this topic in the 6/24/22 Viridian Capital Chart of the Week and wanted to explore the impact of the rescheduling expectations on the industry’s relative positioning.
We used data from 295 companies organized into 13 different industry categories. The assignment of companies into industry groupings follows the work of Aswath Damodaran, a noted finance professor at NYU. Valuation multiples and revenue growth rates were calculated by aggregating all companies in the industry group before calculating the respective ratios.
The top 10 MSOs by market cap collectively have an expected 6.3% compounded revenue growth rate for the next two years, down significantly from the nearly 30% value we measured two years ago. Analysts are arguably being too conservative in their estimates, especially given the potential for Florida, Pennsylvania, and Virginia to go adult rec. Some hopeful signs are also appearing, such as California and New York beginning to tackle their illicit market issues. Still, wholesale price compression is an ongoing reality, and the number of large states that have not yet passed recreational cannabis is shrinking.
The MSO group has an 8.24x EV/ 2024 …