Perhaps the best word to describe the overall status of cannabis stocks in recent months is “malaise.” Many cannabis stocks have taken it on the chin. But there is a silver lining: They’re less expensive than they’ve been in quite a while.
Earnings-based valuation metrics can’t be used for most pot stocks for the simple reason that most cannabis companies aren’t profitable yet. But we can look at price-to-sales (P/S) ratios to determine which cannabis stocks appear to have the most attractive valuations.
What are the cheapest pot stocks on the market right now? Here are the top five based on trailing P/S ratios…
1. Scotts Miracle-Gro
Scotts Miracle-Gro (NYSE:SMG) makes most of its money from selling consumer lawn and garden products. But the company’s Hawthorne subsidiary is the leading supplier of hydroponics solutions for cannabis growers, qualifying Scotts as a cannabis stock. And it’s the cheapest pot stock on the market based on P/S ratio, with shares trading at 1.9 times trailing-12-month sales.
While many cannabis stocks have floundered in 2019, Scotts is enjoying a banner year, with its shares soaring more than 70% year to date. The main reason is that the company continues to easily beat Wall Street revenue and earnings expectations as new product launches drive lawn and garden product sales and an expanding U.S. cannabis market boosts Hawthorne’s revenue.
2. KushCo Holdings
KushCo Holdings (OTC:KSHB) ranks as the second-cheapest pot stock on the market, with its shares trading at only 2.4 times trailing-12-month sales. KushCo’s sales are skyrocketing, with the company posting 221% year-over-year revenue growth in its latest quarter, largely thanks to growing demand for its vaporizers and solvents used in cannabis extraction.
However, KushCo stock is anything but skyrocketing. Its shares are down more than 30% year to date. One key reason is that KushCo continues to lose money and those losses are likely to widen. The stock could enjoy a bump, though, from KushCo’s plans to list its shares on the Nasdaq stock exchange, a move that will increase its exposure to U.S. investors.
3. Village Farms International
Village Farms International (NASDAQ:VFF) shares trade at a low 3.3 times sales. Not only is Village Farms stock cheap, but it also ranked as the best-performing pot stock so far in 2019 as of July.
The company’s cannabis joint venture with Emerald Health Therapeutics, Pure Sunfarms, is now fully operational and generating most of Village Farms’ growth. Pure Sunfarms hopes to soon sell directly to Canadian retailers, which will boost its revenue even more. Village Farms also expects to begin selling hemp biomass in the U.S. this year and transition to selling hemp-derived cannabidiol (CBD) oil in the U.S. in 2020…
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