Hypervaluation is a persistent problem in the pot industry these days. We all know there is a lot of money to be made in the marijuana boom, but stocks in the sector range anywhere from Green Thumb Industries' (GTBIF 1.58%) 10 times sales to Cronos Group's (CRON 4.66%) 72 times sales.
Luckily, there are still some fairly valued marijuana stocks on the market. What's more, brands like Red White & Bloom Brands Inc. (RWBY.F), Acreage Holdings (ACRGF), and Charlotte's Web (CWBHF -0.32%) have returned between 5% and 95% to investors over the past year. Let's see how you can get the most bang for your buck with these pot stocks.
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1. Red White & Bloom
With 25 company-owned stores across six states, Red White & Bloom is a notable pot-grower selling bulk flowers, edibles, concentrates, and cannabidiol (CBD) products. In addition, the company has a solid wholesale segment: Its products are located in more than 700 retail dispensaries.
Red White & Bloom projects it can cultivate 12,500 kg of dried cannabis and 500,000 lbs of CBD per year. In 2020, its revenue amounted to just $40.3 million. However, this year, the business thinks it can increase its sales to between $300 million to $450 million. Catalysts include the nationwide rollout of wholesale CBD, 10 store openings in Michigan, and expansion into Arizona, where recreational cannabis became legal last November.
Maybe investors think the company is overtly ambitious, as its shares are trading at just 0.59 times forward revenue. Nevertheless, Red White & Bloom is currently one of the best emerging cannabis brands across the country, with its pot selling out on the first day of launch at its retail locations this year. What's more, the company is also launching a home delivery program for its vape selection in California, with quick and overnight delivery options. For these reasons, I think Red White & Bloom can live up to its hype.
2. Acreage Holdings
Over the past year, Acreage's notable achievements include beginning recreational pot sales in Maine, expanding into Pennsylvania, and launching new brands in Illinois, Ohio, New York, and New Jersey. Right now, Acreage operates its 29 dispensaries across 13 states and has 18 cultivation and processing facilities. Its sales improved from $74 million in 2019 to $114.5 million in 2020.
At the same time, the company recognized a net loss of $286.6 million. That was a significant increase over the $150.3 million loss it had a year ago. Luckily, the change was primarily the result of a noncash expense of $188 million in asset impairments.
The best part about Acreage is that there is a price floor to its stock. To expand into the U.S., Canadian pot-giant Canopy Growth is acquiring the company for $843 million (its current market cap is about $518) contingent on the federal legalization of marijuana across the border. Trading at just 5.4 times revenue for a sales growth rate of 54% per year, Acreage is a hot cannabis stock that you don't want to miss.
3. Charlotte's Web
Charlotte's Web is currently the No. 1 wholesaler of CBD in all of North America. Its ingestibles, bath and beauty selection, pet CBD, gummies, topicals, tinctures, and capsules are found in more than 22,000 retailers across the continent. The company is launching its products in 1,100 new retail locations each quarter.
Last year, its revenue took a hit as many retail doors closed down temporarily due to the COVID-19 pandemic. At the same time, its e-commerce segment grew to account for over two-thirds of the company's $95.2 million in sales. Even though Charlotte's Web's overall revenue increased 0.67% from 2019, I'd expect it to increase sharply going forward as retail reopenings drive up the wholesale segment as well.
Recovery in retail aside, the company is the only CBD cultivator out there that offers a far-reaching selection of health products. According to internal market research from Charlotte's Web, nearly one out of two new customers who try CBD are referred to the drug by healthcare professionals.. With these traits and a valuation of just 4.8 times future sales in mind, I think Charlotte's Web is still very cheap compared to its potential.
