Many potted stocks you can buy today are overvalued and are trading at incredible premiums, especially since many of them aren’t even profitable and are unlikely to make it anytime soon. . But the actions that are able to balance growth and profitability can be a great long-term investment.
A stock that falls into this bucket isMariMed(OTC: MRMD). And with a market cap of around $ 260 million, it’s not a big company at all. Is this pot stock one of the best buys in the business, or are there some underlying issues that should keep investors from buying shares of this small multi-state trader?
The company posted incredible numbers in the last quarter
On May 17, MariMed released its first quarter results for the first three months of 2021, reporting revenue of $ 24.6 million, a staggering 230% year-over-year increase. ‘other. The company attributes the growth to stronger sales in Massachusetts and Illinois, two of the hottest cannabis markets in the country. Illinois recorded $ 1 billion in legal jar sales last year, while analysts predict Massachusetts will reach annual sales of more than $ 1 billion by 2024.
But the company is looking beyond these two markets. MariMed recently announced the launch of one of its top brands, Betty’s Edibles, in Maine. It is the fifth market to offer edibles, which MariMed says were among the industry’s first vegan cannabis products. It is part of the company’s strategy to focus on unique market opportunities and a way to differentiate its products.
Perhaps even more impressive than MariMed’s encouraging sales figures and growth opportunities, the company also reported last quarter adjusted EBITDA profit of $ 7.6 million, more than eight times adjusted profit. of $ 0.9 million it declared in the same period last year. And its net profit was also positive at $ 4.3 million, down from a loss of $ 2.3 million a year ago.
MariMed’s stock is undervalued
For 2021, the company expects revenue to be $ 100 million and adjusted EBITDA to total $ 30 million. This places the stock at a multiple futures price / sell (P / S) of less than three. It’s very inexpensive compared to some of its peers. Here’s how it compares to some of the country’s smaller multi-state operators based on its revenue for the past year:
And unlike the other stocks in this chart, MariMed has not suffered a net loss in the past 12 months. The stock deserves to trade at a premium given its strong bottom line, and yet it is priced below other stocks in the industry.
One of the reasons it might trade at such a discount is the lack of exposure. Unlike many marijuana stocks, MariMed is only traded on the over-the-counter (OTC) exchange, while other multi-state operators also trade in Canada on the Canadian Stock Exchange or NEO ( the NYSE and NASDAQ remain banned for plants). affecting businesses due to the federal ban on marijuana). As some investors are not able (or willing) to invest over the counter, the pool of potential buyers is limited. A move to another stock exchange could help MariMed’s shares gain much more attention. However, there is no information on the MariMed website to suggest that will change anytime soon.
Should you invest in MariMed?
MariMed has a presence in two excellent markets in Massachusetts and Illinois, which may be enough for the company to deliver fantastic numbers to its investors. Combine that with high margins and low costs which make profitability likely and you have higher pot stock. Although MariMed has already grown almost 500% in value over the past 12 months (well before Horizons Marijuana Life Sciences ETF, which only increases by 30%), there is still so much more upside potential for the stock.
If MariMed is listed on a major exchange, even if it is a second-tier exchange in Canada, it could strengthen its stock. However, one thing is certain: while MariMed can continue to generate these kinds of impressive growth figures this year, its valuation will not stay that low for long, regardless of where its stocks are trading.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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