I am bullish on Trulieve Cannabis (TCNNF) because its strong competitive advantages, optimistic growth outlook, strong Wall Street backing, and undervalued share price make it look like it could be a good time to add shares.
Trulieve Cannabis is a leading American cannabis company operating in 11 U.S. states, with major markets in Florida, Arizona, and Pennsylvania. (See Analysts’ Top Stocks on TipRanks)
Strengths
Trulieve is an industry-leading marijuana company that offers innovative and high-quality cannabis products across its portfolio.
The company is positioned for accelerated growth, expanding its retail and distributions operations in existing and new markets. The company is famous for delivering increased access to cannabis and optimal customer experiences, so that patients and customers can live their life to the fullest.
Trulieve currently operates 155 retail dispensaries and has 3.5 million square feet of cultivation capacity in the U.S.
Recent Results
Trulieve third-quarter revenue amounted to $224.1 million for the period ended September 30. This shows an increase of 64% from the $136.3 million in the previous year’s third quarter.
The company’s net income amounted to $18.6 million in the third quarter of 2021, showing an increase of 7% from $17.4 million in the previous year’s quarter. This was partially offset by $16.4 million of one-time costs related to Harvest Health and Recreation’s acquisition.
The company posted gross profit of $153.9 million with a gross margin of 68.7%, compared to gross profit of $102.2 million and gross margin of 75% in the third quarter of 2020. The cannabis operator also generated an adjusted EBITDA of $98 million, up 43% year over year.
Trulieve reported it closed the deal with Harvest within five months while also meeting its expansion goals in multiple markets. It also started it first cultivation operations in West Virginia, and was awarded a Class 1 production license in Georgia.
The company also closed the equity acquisition deal with Keystone Shops in Pennsylvania, and finalized the acquisition of a dispensary license and started operations in Massachusetts.
In the third quarter, Trulieve also successfully launched a product portfolio consisting of four brands: Cultivar Collection, Muse, Sweet Talk, and Momenta.
The balance sheet had cash of $213.6 million as of September 30.
Valuation Metrics
Trulieve’s stock looks pretty attractive at the moment as its forward EV/EBITDA ratio is only 8.6x, compared to its historical average of 11.2x.
Furthermore, its P/E ratio is 27.4x, compared to its historical average of 30x. Meanwhile, growth is expected to remain robust, with EBITDA poised to grow by 58.3% in 2021 and 48.1% in 2022.
Wall Street’s Take
From Wall Street analysts, Trulieve earns a Strong Buy analyst consensus based on 7 Buy ratings, zero Hold ratings, and zero Sell ratings in the past three months. Additionally, the average Trulieve price target of $68.79 puts the upside potential at 191.6%.
Summary and Conclusions
Trulieve Cannabis is a leading player in a rapidly growing field. It has numerous competitive advantages stemming from scale and network effects, and the near-term growth outlook is very robust.
Furthermore, Wall Street analysts are unanimously bullish on the stock and the price target indicates that the stock price could soar in the coming year.
The valuation multiples also look very reasonable, especially relative to its growth prospects.
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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