The Billion-Dollar Question: How Much Are Cannabis Multi-State Operators Really Worth?

In his latest note, senior analyst Pablo Zuanic from equity research firm Zuanic & Associates assesses the valuation of US Multi-State Operators (MSOs) in the cannabis sector.

Apples-To-Apples: A Nuanced Comparison

Zuanic emphasizes potential federal regulatory shifts, such as rescheduling and banking reforms, and their impact on the valuation of cannabis MSOs.

With states like Ohio moving towards recreational sales and Florida toward recreational legalization, he highlights the nuanced valuation comparisons within the sector despite MSO EV/EBITDA averages in the mid/high single digits.

Zuanic employs an apples-to-apples methodology for estimating MSO valuations, considering factors like the latest share counts, RSUs, derivatives, proforma adjustments for pending deals, net debt, unconventional funding sources, gross leases, tax liabilities (excluding deferred tax) and contingent/derivative liabilities.

The methodology also integrates preferred stock and minority interests in the calculation of enterprise value, ensuring a comprehensive assessment.

US Legal Cannabis Sales Projections

The retail sales of legal cannabis in the US are forecasted to grow consistently. For instance, total sales are expected to rise from $18 million in CY20 to $40 million in CY27. This growth indicates a significant market expansion, with states like Arizona, California, Illinois and Michigan showing notable increases in sales.

This trend suggests an expanding market for MSOs as more states legalize cannabis.

Enterprise Value (EV) Calculations

Zuanic provides a comprehensive EV analysis for various MSOs, including Acreage Holdings ACRHF, Ascend Wellness AAWH, Curaleaf CURLF, and Green Thumb Industries GTBIF, among others.

These valuations are crucial for evaluating investment decisions.

For example, Curaleaf's spot EV according to Z&A is $3,964 million, with a total market capitalization of $2,467 million and financial net debt of -$672 million.

Green Thumb's significant EV of $2,537 million, paired with a large market capitalization and negative net debt, reflects its market presence and financial health.

Trulieve TCNNF follows with an EV of $1,791 million, notable market capitalization, and negative net debt, signaling its considerable market influence. Cresco Labs CRLBF presents a solid market position with an EV of $1,395 million and negative net debt. 

Verano VRNOF stands out with an EV of $2,103 million and a considerable market cap, also underscored by negative net debt.

Photo by Jonathan Borba on Unsplash.