Weekly Snapshot: Index Median Price-to-Sales (P/S) Multiples
The multiples are calculated by dividing the market capitalization of each security in the Index at close of market on final trading day of the week by their respective trailing-twelve-month (TTM) revenue figures (pulled from the four most recent quarters). These multiples are then categorized based on the companies’ segment/sector in the Index, and the median multiples from these groups are pulled for the snapshot.
The median P/S multiple for the Index was 37.9x as of February 17, 2017, a slight decline from 40.8x a week prior.
Sectors in the “Touching the Plant” segment trade at a premium to those in the Ancillary Products & Services segment, driven primarily by the Biotech/Pharma sector.
We expect there to be continued volatility in these multiples in the short- to medium-term. However, in the long-term, we expect these multiples to decrease towards values seen in more mature industries. For example. the lowest multiples in the Index are those of the Hemp and Consumption Devices sectors; hemp food and industrial products as well as various smoking devices have been around for much longer than the legal medical and recreational cannabis markets.
Index Performance Year-to-Date (YTD)
The Viridian Cannabis Stock Index has started 2017 strong. The Index appreciated relatively smoothly through the month of January before reaching its highest point year-to-date, up 38.2%, on February 1. The Index slid over the following six trading days (through February 9) before rebounding slightly on February 10 to finish week 6 up 22.4% YTD. In week 7, the index rose an additional 5.3% to finish up 28.9% YTD.
The Ancillary Products & Services segment has outperformed the “Touching the Plant” segment, up 37.3% and 22.0% YTD, respectively, though the gap between these two segments’ YTD returns has been closing. The outperformance by the former segment is likely due to the dramatic appreciation in stock prices and valuations in the latter segment surrounding the positive results from the U.S. elections this past November as well as Canada’s progression towards a national, recreational market.
Dollar volume in the Index started strong in 2017 but declined late in the first week of trading, adding further evidence to the January Effect as investors completed much of their repurchases in the first few trading days of the year. Through the second week of the year, dollar volume in the Index remained at similar levels as were seen in the first week.
For the third week of 2017, dollar volume in the Index was low on January 16 due to Martin Luther King, Jr. Day in the United States but normalized on January 17 to between approximately $75 and $125 million dollars per day as the U.S. markets reopened and the Index continued appreciating.
Through the fourth and fifth weeks of the year, dollar volume in the Index slid from approximately $125 million to $75 million as a handful of the more highly traded stocks in our Index saw reduced trading volume.
Dollar volume in the sixth week of 2017 was the highest we had seen YTD, with nearly $825 million traded between February 6 and February 10. This was also the first week of the year thus far wherein daily dollar volume was above $125 million on every day of the week. Dollar volume in week 7 surpassed that of week 6, setting a new YTD record of over $971 million traded, 17.8% more than in the week prior. Additionally, a new single-day YTD dollar volume record of nearly $254 million was set on February 15.
The performance of the Viridian Cannabis Stock Index, as a whole and by sector, as well as in comparison to several major market indices, is detailed in the table below:
To learn more about the Viridian CANNABIS STOCK INDEX, contact:
Viridian Capital Advisors, LLC
* Viridian Capital Advisors and its affiliates, as well as their respective partners, directors, shareholders, and employees may have a position in the securities mentioned herein and may make purchases and/or sales from time to time. Viridian Capital Advisors, may act, or may have acted in the past, as a financial advisor, fiscal agent, or underwriter for certain of the companies mentioned herein and may receive, or may have received, a remuneration for their services from those companies.
About the Viridian CANNABIS STOCK INDEX
The Viridian Cannabis Stock Index tracks the performance of approximately 50 publicly traded cannabis companies that meet three of the following four filter criteria:
- Market capitalization ? 10,000,000 USD
- Average daily trading volume ? 20,000 USD
- Float ? 25% of shares outstanding
- Financials filed on time in last 6 months
Stock performance is categorized into 12 different product/technology sectors that comprise the core business segments within the legal cannabis industry. These sectors are further differentiated into two segments, those that “touch the plant” and those that are providers of ancillary products and services.
The above information, whether in part or in its entirety, neither constitutes an offer nor makes any recommendation to buy or sell any securities.
About Viridian Capital Advisors, LLC
Viridian Capital Advisors is a financial and strategic advisory firm dedicated to the cannabis market. We are a data- and market intelligence-driven firm that provides investment banking, M&A, corporate development, and investor relations services to emerging growth companies and qualified investors in the cannabis sector. Our banking practice, through broker-dealer Pickwick Capital Partners, provides capital and M&A to fund the growth of our clients, while our advisory practice helps to position and build their businesses. Our team’s decades of high level operating and transactional experience on Wall Street in a variety of emerging sectors, allows Viridian to provide comprehensive strategic and financial solutions that assist cannabis enterprises in realizing their full potential.