All marijuana stock investors are familiar with the top names in the sector, like Canopy Growth or Aurora Cannabis. But one company worth getting to know doesn't have that kind of fame... at least not yet.
In this segment from Motley Fool Live, longtime Fool contributor Eric Volkman and healthcare and cannabis bureau chief Corinne Cardina identify that operator, and briefly discuss its business and prospects. This video was recorded on March 12.
Corrine Cardina: Let's talk about Virginia. Any stocks already have a presence there, planning a presence there? If I'm just super optimistic about Virginia being the next cannabis market. What should I buy?
Eric Volkman: Well, one interesting play that we've zeroed in on, generally, here at The Motley Fool is a company called Jushi Holdings (JUSHF 3.82%), which is an interesting name. I like that. It sounds so zen doesn't it?
Cardina: It sounds like candy to me for some reason. Something I want to eat.
Volkman: Yeah. You're going to get a big tube of Jushi. Anyway, Jushi, they're a multi-state operator, they are fairly small. They had been off the radar, but they're developing and they're developing pretty quickly.
They have one dispensary in Virginia. Of course, they don't sell recreational weed. They have a dispensary in the town of Manassas which fans of the American Civil War -- and who's not a fan of the American Civil War? -- will know from the two battles that took place near there. Anyway, [the dispensary] is near relatively affluent municipalities and there's a good demographic there.
Jushi altogether has 16 dispensaries, most of these are in Pennsylvania. The interesting thing about Jushi and the thing that sets it apart is their strategy is to go into limited license environments.
What does that mean? Simply, it's places like Pennsylvania, for example, that put strict caps on the number of dispensaries that can operate either on a state level or in a particular municipality. So if there's one city that's rewarding only one or two licenses, that would be attractive to something like Jushi. So the idea behind that is to enter an environment where there is automatically little or almost no competition, which is an interesting and sideways way to approach this [market]. You establish yourself, and you're either almost automatically be top or the only dispensary, the only game in town, the only action.
As a result of their pretty ambitious expansion plans, [Jushi's] revenue has been cranking up. They also, let's see if I have some numbers... yeah. I think they came to prominence mostly because in their most recently reported quarter, Q3 back in November, for the first time they posted an adjusted EBITDA number, which is the preferred profitability metric for marijuana companies -- not least because there's a lot of stuff that goes into the net result that doesn't end up in adjusted EBITDA, so it's easier to post positive number.
Anyway, that aside, that's a good sign. It wasn't a big EBITDA positive number but still it was positive, and the revenue was almost $25 million for that quarter. Again, not an awful lot if you compare it to some of the bigger American or Canadian names. But that was up 67% quarter over quarter, which is impressive, and on a year-over-year basis, it's nearly seven times higher.
So this is a company on rocket fuel. Going forward, I don't see those numbers staying that high. But it's an ambitious company, they want to expand more and they're definitely worth watching for anybody in the marijuana space.
Again, they've been discovered. They're not the sleeper stock they used to be, but they still have growth ahead of it and their valuations are attractive compared to some of the more famous names in the sector.