2019’s Large Market Downswing Has Some Pot Stocks Currently Trading Below Book Value
The Fundamentals of Many Top Cannabis Stocks Are Now Appealing to Value Investors
2019 was an incredible year for investors in almost every sector except cannabis. While the DOW, S&P 500 and NASDAQ indices under President Trump’s administration all enjoyed record highs after record highs, cannabis investors weren’t nearly as fortunate. In fact, after several years of explosive gains catalyzed by adult-use legalization in Canada and a consistent flow of new U.S. states doing the same with medical and recreational marijuana, pot stocks finally experienced a major correction.
After a bullish start to 2019, on March 26th the North American Marijuana Index topped out at $311.17 and was followed by a market correction that tested the nerve of even the most seasoned investors. Over the next nine months, the index declined over 65% before eventually bottoming out at $108.52 on December 5, 2019. The market downswing affected all cannabis stocks in the sector and was catalyzed by CannTrust’s Health Canada scandal, a string of large earnings misses from top Canadian licensed producers (LP), the DOJ’s antitrust reviews on several U.S. multi-state operator (MSO) and capped off by the Vape Crisis.
With the cannabis market in turmoil, short-sellers seized the opportunity raking up north of $1 billion in profits as the bulls ran for cover. Once high flying pot stocks such as Aurora Cannabis and HEXO Corp both plummeted around 85% from their 2019 peak and due to recent negative headlines have yet to put in a bottom. While Aurora and HEXO struggle to stay afloat, other cannabis stocks like Canopy Growth, Aphria, Curaleaf, Trulieve and Liberty Health have all experienced technical reversals and are now leading the charge in what will likely turn out to be a new bullish uptrend.
2020 is off to a mixed start with a few of the stronger players making an early push higher but overall, share prices throughout the sector are still very cheap. The extreme cannabis carnage of 2019 has left many pot stocks in the sector in an unfamiliar position. For possibly the first time in the industry’s history, investors are now viewing some cannabis stocks as being potentially being undervalued.
Source: Shutterstock
At one point in time, the words “Cannabis Stocks” and “Undervalued” would have been considered an oxymoron. What a difference a year can make. Over the years, value investors have relied on a financial metric called the Price-to-Book Ratio (P/B Ratio) to help screen for undervalued stocks.
The P/B Ratio is a financial ratio used to compare a company’s current share price to its book value. Historically, any stock with a P/B ratio under 1.0 is considered to be likely undervalued. Many value investors now consider a company with a P/B ratio under 3.0 to also be in good value territory and potentially undervalued.
Below we’ve highlighted a list of 25 pot stocks with P/B Ratios that could be viewed as undervalued and therefore might make attractive value investments at current market levels.
Investors should not rely solely on a stock’s P/B ratio when making an investment decision. There could be many reasons why a company’s share price has declined to such low levels. Use the information below as part of your overall due diligence strategy.
*P/B ratios as of market close on Jan. 29/2020. Data via ycharts.com
25. Green Thumb Industries (CSE: GTII) (OTCQX: GTBIF) (FRA: R9U2)
- P/B Ratio: 2.45
- Share Price: $13
- YTD ROI: +1.09%
Learn more about Green Thumb: Website | IR Website | Investor Deck | GTII Chart
24. Harvest Health (CSE: HARV) (OTCQX: HRVSF)
- P/B Ratio: 2.3
- Share Price: $3.75
- YTD ROI: -11.76%
Learn more about Harvest Health: Website | IR Website | Investor Deck | HARV Chart
23. Neptune Wellness (TSX: NEPT) (NASDAQ: NEPT) (FRA: NTU)
- P/B Ratio: 2.3
- Share Price: $3.41
- YTD ROI: -3.94%
Learn more about Neptune Wellness: Website | IR Website | Investor Deck | NEPT Chart
22. Village Farms (TSX: VFF) (NASDAQ: VFF) (FRA: 02V)
- P/B Ratio: 2.2
- Share Price: $7.22
- YTD ROI: -11.95%
Learn more about Village Farms: Website | IR Website | Investor Deck | VFF Chart
21. Canopy Growth (TSX: WEED) (NYSE: CGC) (FRA: 11L1)
- P/B Ratio: 2.02
- Share Price: $31.03
- YTD ROI: +10.82%
Learn more about Canopy Growth: Website | IR Website | Investor Deck | WEED Chart
20. Liberty Health (CSE: LHS) (OTCQX: LHSIF) (FRA: S6UQ)
- P/B Ratio: 1.86
- Share Price: $0.72
- YTD ROI: +18.03%
Learn more about Liberty Health: Website | IR Website | Investor Deck | LHS Chart
19. Organigram Holdings (TSX: OGI) (NASDAQ: OGI) (FRA: 0OG)
- P/B Ratio: 1.78
- Share Price: $3.57
- YTD ROI: +10.19%
Learn more about Organigram: Website | IR Website | Investor Deck | OGI Chart
18. WeedMD (TSXV: WMD) (OTCQX: WDDMF) (FRA: 4WE)
- P/B Ratio: 1.66
- Share Price: $0.78
- YTD ROI: -9.3%
Learn more about WeedMD: Website | IR Website | Investor Deck | WMD Chart
17. Cronos Group (TSX: CRON) (NASDAQ: CRON) (FRA: 7CI)
- P/B Ratio: 1.59
- Share Price: $9.91
- YTD ROI: -4.53%
Learn more about Cronos Group: Website | IR Website | Investor Deck | CRON Chart
16. TransCanna Holdings (CSE: TCAN) (OTC: TCNAF) (FSE: TH8)
- P/B Ratio: 1.43
- Share Price: $1.24
- YTD ROI: -5.34%
Learn more about TransCanna: Website | IR Website | Investor Deck | TCAN Chart
15. Auxly Cannabis (TSXV: XLY) (OTCQX: CBWTF) (FRA: 3KF)
- P/B Ratio: 1.36
- Share Price: $0.66
- YTD ROI: +17.86%
Learn more about Auxly Cannabis: Website | IR Website | Investor Deck | XLY Chart
14. Meta Growth (TSXV: META) (OTCPK: NACNF) (FRA: 1HV)
- P/B Ratio: 1.24
- Share Price: $0.18
- YTD ROI: -45.45%
Learn more about Meta Growth: Website | IR Website | Investor Deck | META Chart
13. CannTrust Holdings (TSX: TRST) (NYSE: CTST) (FRA: C9S)
- P/B Ratio: 1.1
- Share Price: $1.49
- YTD ROI: +20.16%
Learn more about CannTrust: Website | IR Website | Investor Deck | TRST Chart
12. Aphria (TSX: APHA) (NYSE: APHA) (FRA: 10E)
- P/B Ratio: 0.94
- Share Price: $6.40
- YTD ROI: -7.25%
Learn more about Aphria: Website | IR Website | Investor Deck | APHA Chart
11. Supreme Cannabis (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1)
- P/B Ratio: 0.73
- Share Price: $0.52
- YTD ROI: -18.75%
Learn more about Supreme Cannabis: Website | IR Website | Investor Deck | FIRE Chart
10. Canopy Rivers (TSX: RIV) (OTCPK: CNPOF)
- P/B Ratio: 0.71
- Share Price: $1.40
- YTD ROI: +20.69%
Learn more about Canopy Rivers: Website | IR Website | Investor Deck | RIV Chart
9. 48North (TSXV: NRTH) (OTCPK: NCNNF)
- P/B Ratio: 0.66
- Share Price: $0.35
- YTD ROI: -6.67%
Learn more about 48North: Website | IR Website | Investor Deck | NRTH Chart
8. HEXO Corp. (TSX: HEXO) (NYSE: HEXO) (FRA: 74H)
- P/B Ratio: 0.66
- Share Price: $1.68
- YTD ROI: -21.5%
Learn more about HEXO: Website | IR Website | Investor Deck | HEXO Chart
7. Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P)
- P/B Ratio: 0.64
- Share Price: $2.54
- YTD ROI: -13.01%
Learn more about Aurora Cannabis: Website | IR Website | Investor Deck | ACB Chart
6. Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) (FRA: O1GA)
- P/B Ratio: 0.56
- Share Price: $0.69
- YTD ROI: -10.39%
Learn more about TGOD: Website | IR Website | Investor Deck | TGOD Chart
5. Aleafia Health (TSX: ALEF) (OTCQX: ALEAF) (FRA: ARAH)
- P/B Ratio: 0.46
- Share Price: $0.65
- YTD ROI: +1.56%
Learn more about Aleafia Health: Website | IR Website | Investor Deck | ALEF Chart
4. iAnthus Holdings (CSE: IAN) (OTCQX: ITHUF) (FRA: 2IA)
- P/B Ratio: 0.41
- Share Price: $1.98
- YTD ROI: +1.54%
Learn more about iAnthus: Website | IR Website | Investor Deck | IAN Chart
3. MedMen (CSE: MMEN) (OTCQX: MMNFF) (FRA: 0JS)
- P/B Ratio: 0.31
- Share Price: $0.52
- YTD ROI: -28.77%
Learn more about MedMen: Website | IR Website | Investor Deck | MMEN Chart
2. Emerald Health (TSXV: EMH) (OTCQX: EMHTF) (FRA: TBD)
- P/B Ratio: 0.26
- Share Price: $0.31
- YTD ROI: -6.06%
Learn more about Emerald Health: Website | IR Website | Investor Deck | EMH Chart
1. SOL Global (CSE: SOL) (OTCPK: SOLCF) (FRA: 9SB)
- P/B Ratio: 0.1
- Share Price: $0.40
- YTD ROI: -35.48%
Learn more about SOL Global: Website | IR Website | Investor Deck | SOL Chart
Also Read: BMO Capital Markets Upgrades Canopy Growth
WEED Price Target Increased By 60%
*** Get Your Copy of The Ultimate Cannabis Investing Guide ***
Join the Discussion in the TCI Investor Group
Disclosure: The Cannabis Investor holds a position in Liberty Health. TransCanna is a client of The Cannabis Investor. Aleafia Health is a former client of The Cannabis Investor.
Read More:
Featured ArticlesCannabis Stock NewsCannabis Industry ArticlesTechnical Analysis ArticlesWatch Cannabis Stock Videos
