While most pot stocks are down in the dumps, there is one company that’s managed to hold its own amid the chaos. Shares of marijuana heavyweights such as Aurora Cannabis, Canopy Growth, and Hexo are trading 91%, 70%, and 93% respectively below their record highs.
However, cannabis retail giant Trulieve Cannabis (CNSX:TRUL) is trading at its record high and is up 200% since its IPO in late 2018. The company recently reported its Q2 results where net sales touched a record high of US$120.8 million, up 26% sequentially. Its adjusted EBITDA accounted for 50% of revenue indicating the 10th consecutive quarter of growth and profitability.
Trulieve’s free cash flow in Q2 stood at US$39.6 million and it ended the quarter with US$150.3 million in cash. Trulieve also increased its revenue guidance for 2020 to between US$465 million and US$485 million, up from its earlier forecast of US$380 million and US$400 million. Further, its EBITDA is forecast between US$205 million and US$225 million for 2020, compared to an earlier estimate of between US$140 million and US$160 million.
At a time when a majority of marijuana companies are grappling with mounting losses, lower than expected demand and tepid top-line growth, Trulieve’s stellar results and improved guidance is encouraging. Trulieve stock gained 10% in the last two trading days, following its Q2 results.
A pot stock focused on the medical marijuana space
Trulieve is a multi-state cannabis operator with a presence in four states south of the border. As of June 2020, it operates 1.78 million square feet of cultivation facilities and has managed to develop a suite of Trulieve branded products with over 500 stock-keeping units. It ended Q2 with 57 retail stores in the U.S. encompassing 152,771 square feet.
Trulieve has a huge presence in Florida’s medical marijuana segment with a 51% share. It has 55 stores in Florida and a total of 57 stores in the U.S. Its first-mover advantage has helped the company gain brand recognition which has translated into robust top-line growth.
According to a report from Arcview Market Research, Florida will account for $1.9 billion in marijuana sales by 2024. In case, Trulieve can sustain its market share of 51%, it will generate close to $1 billion in sales from the Sunshine state.
In case recreational cannabis is legalized in Florida, Trulieve’s already established presence will help it gain traction and grow revenue at a stellar pace. Trulieve is also trying to leverage opportunities in California, Connecticut, and Massachusetts. California is already the largest marijuana market in the world while Massachusetts will generate $1 billion in pot sales in the near future.
Trulieve trading at an attractive valuation
Trulieve stock is trading at a forward price to sales multiple of 5.5 and a price to earnings multiple of 38 which is not too expensive for a high growth cannabis company. The company’s sales are forecast to grow at 91% in 2020 and 33.7% to US$644.7 million in 2022.
Trulieve cannabis is a top pot stock to buy and hold for the upcoming decade given the company’s multiple growth drivers, profitability, and strong balance sheet.
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The Motley Fool recommends HEXO. and HEXO. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.