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Trulieve Cannabis: Market Leader, Reasonably Valued
Stock Analysis & Ideas

Trulieve Cannabis: Market Leader, Reasonably Valued

Trulieve Cannabis is a “seed to sale” company that offers medical cannabis and is the first fully-licensed marijuana company in Florida. The company grows and harvests its products internally and sells them through Trulieve branded stores and to patients directly.

I am bullish on Trulieve Cannabis Corp. (TCNNF) because its valuation multiple is attractive compared to its growth potential and Wall Street is unanimously bullish on shares, giving it significant upside potential. (See Insiders’ Hot Stocks on TipRanks)

Strengths

Trulieve has the distinction of being the largest fully-licensed marijuana company in Florida. The company also operates in California, Connecticut, and Massachusetts. It has achieved a number of milestones, including reporting profitability in 14 consecutive quarters as well as 500,000 customers served.

Trulieve also became the very first medical marijuana operator to start a harvest in West Virginia. In addition, it has successfully won the approval of a Class I production license in Georgia.

Trulieve also opened its 100th dispensary in Florida in the city of Tallahassee, which is also known for being the city where the company opened its first store.

Recent Results

Trulieve’s second quarter results showed revenue reaching $215.1 million, a sequential improvement of $21 million. The company showed 78% growth from the second quarter of 2020.

Trulieve also showed net income of $40.9 million, up 36% from the previous quarter, and 116% from the same period of the previous year. Adjusted EBITDA was reported at $94.9 million, showing a 4% improvement quarter-over-quarter and a 55% improvement year-over-year.

It also reported a gross profit of $144.5 million compared to the gross profit of $90.5 million on a year-over-year basis and a gross margin of 67% compared to a gross margin of 75% from the second quarter of 2020.

The company’s operating expenses were estimated at a total of $61.5 million versus $57.3 million quarter-over-quarter and $34.9 million year-over-year.

Trulieve also received private offering commitments that would allow it to raise $350 million via senior secured notes. This capital will be used to pay off the outstanding debts of Harvest Health & Recreation, whose acquisition by Trulieve was finalized in late September.

Valuation Metrics

Trulieve’s stock looks attractively priced at the moment, as its trailing twelve months EV/EBITDA ratio is 17.4x compared to the sector median of 19x. Furthermore, its price-to-forward normalized earnings ratio is 28x comparted to its historical average of 30x.

Wall Street’s Take

From Wall Street analysts, Trulieve earns a Strong Buy consensus rating based on five Buy ratings in the past 3 months. Additionally, the average Trulieve Cannabis price target of $61.84 implies 106.2% upside potential.

Summary and Conclusions

Trulieve operates in a rapidly growing industry and has achieved significant scale and status as a market leader. Furthermore, it is generating strong profitability and has significant growth potential, while still trading at a reasonable valuation, including a discount to its historical average and sector median.

On top of that, Wall Street analysts are unanimously bullish on the stock at the current price and the consensus price target indicates that it could more than double over the next year. As a result, it might be a good time for investors to consider adding shares.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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