Recent data from the Viridian Cannabis Deal Tracker highlights significant changes in the valuation multiples of major multi-state operators (MSOs) in the cannabis sector.

The Viridian Cannabis Deal Tracker has become an indispensable tool for companies, investors and acquirers in the cannabis industry.

With its comprehensive database tracking over 2,500 capital raises and 1,000 M&A transactions totaling more than $65 billion since 2015, it offers vital market intelligence for strategic decision-making.

39% Market Value Rise

Over the past year, the majority of the 14 major cannabis companies have seen their market value increase compared to their expected earnings.

A year-on-year comparison from April 14, 2023, to April 12, 2024, reveals an overall increase in Enterprise Value to Consensus Next Twelve-Month (NTM) EBITDA multiples for the majority of the 14 major MSOs analyzed.

Eleven out of these fourteen companies have seen their valuation multiples rise, with increases ranging from 3% to a remarkable 70%.

As a group, these cannabis companies have seen their overall market value rise by 39%, indicating they're now valued higher compared to their future profits.

This growth has resulted in the group's aggregate EV/NTM EBITDA multiple expanding from 6.13x to 8.53x.

Analyzing The Shifts

The shifts in valuation multiples can be attributed to either an increase in Enterprise Value (EV), a decrease in EBITDA, or a combination of both factors, showing a trend of higher valuation for the same level of earnings.

The analysis showed that the overall group's EV/EBITDA increase was due to a significant 37.9% rise in enterprise values while EBITDA estimates slightly fell by 0.9%.

This indicates a market trend of valuing a static amount of EBITDA at a higher rate.

Future Potential Over Current Earnings

Particularly notable are companies like Curaleaf (OTC:CURLF) and Schwazze (OTC:SHWZ), which experienced pure multiple expansion despite flat or declining EBITDA estimates.

This suggests investors are valuing future potential over current earnings.

On the other hand, companies such as GTI (OTC:GTBIF) and Cresco (OTC:CRLBF) showed both increased EBITDA multiples and estimates, highlighting strong fundamentals and potential for growth.

The anticipation of cannabis rescheduling has been a significant driver of multiple expansions, with the expectation that a larger portion of EBITDA will convert into free cash flow.

However, the report advises investors to keep a keen eye on EBITDA growth as a fundamental indicator of corporate health.

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