TDR Research Rates Trulieve Cannabis A 'Buy', Potential 46% Stock Price Upside

TDR Research has recently initiated coverage of multi-state cannabis company Trulieve TCNNF, assigning it a “Buy” rating based on an extensive analysis of the company's financial health and growth potential. The report highlights Trulieve's robust financial metrics and strategic positioning in cannabis markets.

The 2024 financial estimates include $1.20 billion in revenue, a 55.1% gross margin and a 24.9% EBITDA margin, projecting an EBITDA of $298.8 million.

Investment Rating

The valuation employs three key methods: Discounted Cash Flow (DCF) growth, DCF revenue, and EV/Revenue. The blended fair value of Trulieve’s stocks is estimated to be $15.29, suggesting a potential upside of 46% from the current price of $10.45. Trulieve’s financial metrics, such as a high current ratio and a lower liabilities-to-assets ratio underpin this potential return.

Strengths

Trulieve Cannabis Corp., a prominent multi-state cannabis retailer, is involved in the cultivation, processing and manufacturing of a wide range of cannabis products such as flowers, edibles, vapes, creams, balms and lotions. Headquartered in Quincy, Florida, Trulieve operates dispensaries in key states including Arizona, Georgia, Ohio, Maryland, West Virginia, Connecticut and Pennsylvania.

Trulieve displays robust cost management and profitability, as evidenced by its higher-than-average gross profit margin. According to TDR, the company has also shown effective cash flow management, with a high levered free cash flow (LFCF) margin and significant positive change over the last twelve months. These financial strengths contribute to Trulieve’s paying dividends and withstanding economic downturns.

Challenges And Opportunities

Despite its strengths, the report notes that the company’s recent and long-term EBITDA growth is below industry averages. Meanwhile, the negative change in gross profit margin and modest improvement in SG&A margin further highlight the need for enhanced cost control.

Yet, the anticipated regulatory changes in the cannabis industry, including additional legalization in key states like Florida and potential federal legalization further enhance Trulieve’s prospects, making it a promising option for investors seeking substantial returns.

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