The latest quarterly report from Canopy Growth Corporation (OTCMKTS:TWMJF) highlights that its strategy works. It has placed itself to grow rapidly and it has performed so through its new patient enrollments and partnerships. Despite the successes in the firm, the analysts consider the markets extremely optimistic in how they are pricing company.
Canopy had at one point recorded a market cap of over $2 billion, a stock price of $17.86, which to market experts seems excessive. Lately, the stock had moved back in the range of $8 to $12. Based on the closing price as of December 2, 2016, Canopy Growth is currently valued at about $994.36 million. This represents a market cap of over a third of the Canadian publicly traded cultivators. Most firms with more than a billion dollars in valuation usually record more revenues than company’s $5.4 million a quarter.
The company boasts a high gross margin due to unrealized benefit on changes in fair value of biological properties. This line item increases the final net income. There are other indicators that reflects the company is overvalued. It has beta of 9.88, which indicates the stock is extremely volatile against the overall stock market. A stock’s beta of 1.2 suggests the equity is 20% more volatile compared to the markets. Clearly a beta of 9.88 imply a notably riskier investment. Also, the PE ratio reveals how TWMJF is overvalued.
Canopy Growth has sold medical marijuana amounting to 1,169 kg this past quarter compared to 984 kg in the same period a year earlier. Total patients have grown over 46% to 24,400 from a quarter earlier. It has ventured into the Quebec market via its acquisition of Vert Medical. The firm has extended its product offerings through buying Hemp producer firm, Groupe H.E.M.P.Ca. It has recruited Goldman Group to help establish and expand company’s production capacity. There will be increased joint ventures and acquisitions in the lead up to upcoming demand for recreational marijuana.