With the boom of the medical marijuana industry in recent years, it’s no surprise that a similar boom has occurred on the stock market with cannabis stocks. As more and more states continue to loosen their legislation on the use of the drug, with many going as far as to legalize it completely for both medical and recreational use, it makes sense for retail investors and traders to want to get in on the boom – after all, look at how much is to be gained when investing in other pharmaceutical endeavors.
But, of course, there are plenty of choices when it comes to finding the top cannabis stocks. Two of the biggest contenders are Trulieve Cannabis (TCNNF) and Curaleaf Holdings (CURLF). Which one is best?
Trulieve Financials Are Stellar
Publicly traded since 2018, Trulieve is a chain of marijuana dispensaries throughout Florida, California, Connecticut, Massachusetts, and Pennsylvania. Its products are specially grown according to the company’s strict quality standards to ensure the best plant for its customers.
Over the last twelve months, Trulieve has brought in just shy of $620 million dollars. With a cost of revenue of just $171.4 million, Trulieve walks away with a gross profit of $447.8 million — this is consistent with years past for the company, which — with the exception of its first calendar year on the market — has never walked away with less than $360 million in gross profit at the end of each year.
Trulieve Valuation An Opportunity?
Despite consistently increasing its gross profit each year for the past several years, Trulieve has seen its valuation dip somewhat since March 2021.
Well, actually, that might be something of an understatement. Just a few months ago, Trulieve was granted a market cap of $8.08 billion. Today, its market cap is around $6.75 billion. This is still a very significant and impressive number, especially for a medical marijuana company, but its also somewhat concerning to see a dip like that happen so fast.
Now, there’s always the possibility that it could simply tick back up in a few months’ time, but for now, this devaluation of more than a billion dollars is enough to raise some eyebrows.
Is Trulieve Stock A Buy?
When all is said and done, Trulieve is a strong buy — even though its share price has dipped from over $50 a share in March of 2021 down to $36 in the span of a few months, it’s still projected to bring in over a billion dollars in revenue over the course of the next year, which will almost certainly help to turn those numbers around in due time. However, the question remains: Trulieve might be a buy, but is Curaleaf a better one?
Curaleaf Valuation Has Massive Upside Potential
Founded in 2010, Curaleaf has been a publicly traded company since the fall of 2018.
Curaleaf has seen its price per share go from $8.43 in November of 2018 to a peak $16.86 in February of 2021, then back down to around $14 in June of 2021.
Curaleaf has the upper hand when it comes to its market cap: Between its third and fourth quarters, Curaleaf’s market cap exceeded Trulieve’s by a few billion dollars, up from $4.78 billion to $10.47 billion. Since then, its market cap has dipped somewhat, down to $10.27 billion, but this is still significantly above Trulieve’s $6.75 billion.
From a valuation perspective, analysts believe the upside potential for Curaleaf is $22 per share, representing around 50% upside at the time of writing.
Curaleaf May Have A Cash Crunch Problem
While Curaleaf has been demonstrating exceptional sales numbers in the past several quarters, there are still some risks to take into consideration before investing in this company.
For starters, it’s expensive for Curaleaf to operate: its negative cash flow exceeds the total cash on hand by about $20 million, meaning Curaleaf will almost most likely have to raise more funds at some point.
This shows that, while its numbers have definitely been impressive, Curaleaf still isn’t ready to operate independently of investors just yet. This could cause some trouble down the line, should Curaleaf’s investors suddenly decide not to invest anymore.
Alas, this is going to be present in all sorts of startups, marijuana industry or not. It’s definitely an issue, but more of a long-term one at that.
Is Curaleaf Stock A Buy?
Regardless of the problems with cash flow, Curaleaf is likely worth investing in for retail investors and traders looking to get into the booming marijuana industry. Its many positives outweigh any negatives at this point in time, and its long-term forecast is promising enough for some investors to just ignore those negatives altogether.
But, while Curaleaf is worth buying, is it the better buy over Trulieve?
Trulieve Stock Vs Curaleaf: Which Is Best?
After taking a look at both marijuana companies and weighing financials, valuations, and risks, the answer still isn’t super clear: Which is best, Trulieve or Curaleaf stock?
Ultimately, with two great options for retail investors and traders to choose from, it’s hard to say either company is “worst.” Both will serve as steady earners in the coming years, and neither one should suffer from a sudden and unexpected drop that will lose investors everything they put in.
However, there is one that will likely bring in more earnings than the other, and that’s Trulieve. In spite of Curaleaf’s greater market cap, Trulieve has the higher price per share, and the higher margins to boot.
From a valuation perspective, Trulieve has an upside potential of 89% at the time of writing vs 52% for Curaleaf, giving the edge to Trulieve.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.