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Is Jushi Holdings a Buy?

By Zhiyuan Sun - May 18, 2021 at 6:28AM

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This pot grower is blasting through the recreational cannabis market in Pennsylvania. Here's how it can make you rich.

Jushi Holdings (JUSHF -0.53%) has been busy lining the pockets of its shareholders over the past year, with a stunning 585% gain since last May. That is a magnificent outperformance of the S&P 500's 45% growth over the same period.

The company is rapidly gaining traction in Pennsylvania, where it has opened 11 dispensaries with plans to launch another seven. Keep in mind, the state only has about 100 dispensaries in operation. Here's why I believe all signs are pointing to continued momentum for Jushi's stock.

Woman smoking a joint in a plantation.

Image source: Getty Images.

Fantastic results

In 2020, Jushi grew its sales by 690% year over year to $80.8 million. At the same time, its gross profit improved by 760% to $41.5 million, with a loss from operations of $10.5 million, a massive $23.7 million improvement from the year prior. Jushi's selection of vapes, dried flower, concentrates, edibles, and hemp CBD has proved to be extremely popular among pot users. The company saw upwards of 560 new customers every day in Q4 2020.

A big portion of its growth came from four of its dispensaries in Illinois. The state opened up to recreational cannabis sales at the beginning of 2020. Its total addressable market is already about $1.3 billion per year in revenue. Jushi is excited by the potential of Illinois in part because of its limited licensing. The early movers with licenses to sell cannabis in the state, including Jushi, will glean the most from revenue growth in the early years of cannabis sales there.

Jushi is also strategically positioning itself for the beginning of adult-use sales in Virginia in January 2024. Thus far, the company operates one medical dispensary there and plans to open an additional five stores in the state. Virginia will add dried flower into its medical marijuana program by this October. On May 4, Jushi expanded to California after closing the acquisition of two dispensaries in Palm Springs and Grover Beach.

This year, the company estimates it will bring in between $205 million and $255 million in sales and $40 million to $50 million in operating income less non-cash items (EBITDA). The results will be driven by strengthening operations in Pennsylvania and Illinois, as well its expansion into California.

Can you count on Jushi? 

Jushi is well positioned for success in financial terms. Capital-wise, the company has about $168 million in cash compared to $82 million in debt. Over the years, its founders and management have put up a total of $47 million of their own money into the stock. When insiders are willing to put a stake in the company, it is indicative that they believe in its future success.

What's more, Jushi is already on track to blast past its guidance for the year. During Q1 2021, the company recognized $41.6 million in revenue, which is a 384% increase from Q1 2020. Despite growing its sales by triple-digit percentages, Jushi's stock only trades for three times forward revenue.

The best news for Jushi Holdings might just be that the growth story of the Pennsylvania cannabis market is far from over. Medical marijuana sales growth of 120% per year aside, the state also has record-level support for the legalization of recreational cannabis. Overall, I think Jushi has everything it takes to continue its momentum here and in other states. For these reasons, Jushi easily earns a spot on my top marijuana stock list. 

Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Jushi Holdings. The Motley Fool has a disclosure policy.

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