Trulieve: a Cheap U.S. Cannabis MSO

As the sun comes up over the valley, devastation across the cannabis sector equities comes to light. We nevertheless believe legislative developments in U.S. states and Washington point to equities in both Canada and the U.S. trading at extremely attractive levels. In 2021-2022, as institutional buyers likely enter the market for the first time and regulatory relief takes the stage, we believe valuations in this bloodied sector will move significantly higher - we must be there for the turn.

One particularly attractive name in the U.S. is TCNNF Trulieve Cannabis, one of the largest MSOs (multi-state-operator) in the country.

One particularly attractive name in the U.S. is TCNNF Trulieve Cannabis, one of the largest MSOs (multi-state-operator) in the country.

Trulieve's valuation on an EV/EBITDA basis has come crashing lower (more attractive) in the past 2 years, yet the stock price has remained relatively flat. While many software and cloud stocks trade at EV/EBITDA multiples of 20x or more, TCNNF grew sales at 145% last year and now sits an 8x multiple.

The company has become increasingly profitable and unlike many of its peers in the emerging industry, Trulieve already has positive EBITDA margins over 40%.

The company is vertically integrated and is dominating the Florida cannabis market with plans to soon expand its presence in California and Massachusetts. Being one of the largest cannabis companies in the U.S. with a $1.5B market cap, we see TCNNF as a large winner when the Street is finally "allowed in".

Bottom line, once there is a U.S. Cannabis ETF and institutions are building a sector basket, this profitable MSO is going to be seeing colossal capital inflows.

Produced in partnership with The Bear Traps Report / Bastien Chenivesse