Canadian Cannabis Companies Are More Valuable Than Rivals In The U.S.

Viridian Capital Advisors has released a report comparing the valuations of U.S. multi-state operators (MSOs) and Canadian licensed producers (LPs) with market caps over $100 million.

The report reveals that Canadian LPs enjoy significantly higher valuations compared to their U.S. counterparts, despite often not producing any net income. For investors interested in the cannabis industry this discrepancy raises a question: what’s going on?

Understanding Valuation Metrics

Valuation metrics such as enterprise value (EV) to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and EV to revenue are a way to understand how a company is valued relative to its earnings and sales. These metrics help investors determine if a stock is overvalued or undervalued and thus decide on investment actions.

According to Viridian’s tracker, the median EV/2024 EBITDA for Canadian LPs is significantly higher than that of U.S. MSOs. This means that investors are willing to pay more for each dollar of EBITDA generated by Canadian compared to U.S. companies.