Cannabis Stock Valuations Reflect No Expectation Of Federal Reform: Study

A new valuation analysis by Viridian Capital Advisors suggests that U.S. multi-state cannabis operators (MSOs) are trading at levels that indicate no expectation of federal rescheduling or 280E tax relief. The firm conducted a discounted cash flow (DCF) study of 15 cannabis companies, modeling a worst-case scenario where 280E remains indefinitely, growth slows and EBITDA margins peak in 2027 before declining. Despite the bleak outlook, market valuations remain slightly higher than the model predicts, though Viridian explicitly states that this does not indicate confidence in federal reform.

Valuation Analysis: The Worst-Case Scenario For Marijuana Stocks

Viridian built a DCF model assuming that MSO EBITDA multiples should be compressed under current market realities. The analysis factors in:

No repeal of 280E, meaning cannabis operators will continue facing high tax burdens.
Slowing revenue growth, peaking at 9.8% in 2027 before declining to 6% and then 5%.
Declining EBITDA margins, topping at 28.4% in 2027 before deterioration.
A 25% tax rate on gross profit, calculated at 1.5x EBITDA to reflect current taxation realities.
A required equity return of 18.8%, reflecting industry volatility and risk factors, including federal illegality and commoditization.
Debt rates at 15%, aligned with trading yields of the most creditworthy MSOs.

Based on these assumptions, Viridian calculated that 2024 EBITDA multiples should fall between 3.95x and 4.93x. Yet, as of February 7, 2025, the median EV/2024 EBITDA multiple across major MSOs stood at 5.49x. Nonetheless, Viridian notes that this does not reflect optimism for federal reform but rather other market factors that may be sustaining valuations.

The Companies Analyzed: Top MSOs, Mid-Tier Players And Regional Operators

Viridian examined a mix of top-tier MSOs, mid-sized operators and regionally focused cannabis companies, each facing unique market pressures. The study included:

Leading MSOs

Curaleaf Holdings Inc. CURLF
Green Thumb Industries, Inc. GTBIF
Trulieve Cannabis Corp. TCNNF
Verano Holdings Corp. VRNOF
Cresco Labs Inc. CRLBF
TerrAscend Corp. TSNDF

Mid-Tier MSOs And Vertically Integrated Operators

Ascend Wellness AAWH
AYR Strategies Inc. AYRWF
The Cannabist Company CBSTF
Jushi, Inc. JUSHF
MariMed Inc. MRMD
Planet 13 Holdings Inc. PLNHF

Regional Players And Specialists

Cansortium, Inc. TIUMF
Glass House Brands Inc. GLASF
Grown Rogue International Inc. GRUSF
Vireo Growth Inc. VREOF

The Market’s Verdict: No Rescheduling Priced In

Despite some MSOs trading above the 4-5x EBITDA range derived from the DCF model, Viridian states: “The market is not assuming that 280E will be eliminated, or at least not in the next year.” This aligns with its broader conclusion: “Expectations of slowing growth and peaking margins are ingrained in valuations.”

Viridian makes it clear that while valuations are not as dire as the model suggests, they remain muted. A year ago, optimism about rescheduling, SAFE Banking and tax relief was higher. Today, MSOs trade at levels that suggest no expectation of federal reform in the near term. The slight premium in valuations over the worst-case scenario does not indicate confidence in federal action but rather other market factors, such as state-level growth potential or operational efficiencies.

Florida And Texas: The Only Growth Hope?

Viridian's 2027 growth peak of 9.8% seems tied to speculation about Florida and Texas opening up to adult-use markets. Trulieve, Verano and Cansortium stand to gain significantly if Florida legalizes recreational sales, while companies like Cresco, Green Thumb and Curaleaf could benefit from Texas expansion. However, Viridian does not suggest that federal reform is driving these expectations—rather, state-level catalysts are viewed as the only potential bright spots.

What’s Next?

With rescheduling uncertainty and no immediate policy relief expected, the U.S. cannabis industry remains in valuation limbo. While top-tier MSOs still command respectable multiples, smaller players face significant pressure. Investors appear cautiously pessimistic, not fully pricing in catastrophe but likely lacking confidence in swift federal action.

The key catalysts to watch include state-level adult-use legalization (Florida, Texas), potential movement on SAFE Banking and the long-delayed rescheduling decision. However, Viridian's analysis indicates that valuations are not reflecting hope for federal reform and that any potential upside is tied to state-driven growth and operational factors rather than expected policy changes.

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