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Tilray, Sundial Growers, Canopy Growth. If you’ve been following the cannabis industry at all, you’ve probably heard a lot about these stocks so far this year.
However, the best opportunities do not always lie with the most well-known stocks. You can often make a lot more money in the long run by finding stocks that are not as widely followed. Here are three great under-the-radar cannabis stocks to buy right now.
Image source: Getty Images.
Ayr Wellness
Ayr Wellness (OTC:AYRW.F) ranks as one of the fastest growing US cannabis multistate operators (MSOs). Once the acquisition of the Garden State Dispensary in New Jersey is completed, the company will have a presence in seven states.
In the first quarter of 2020, Ayr generated revenue of $58.4 million, up 74% year-over-year. It provided adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $18.4 million. CEO Jonathan Sandelman said the strong Q1 performance represents “the early innings” of Ayr’s transformation.
That is a good assessment in my opinion. Ayr has huge growth prospects in today’s markets. The Garden State Dispensary deal is expected to close in July. There is also the possibility that Florida could legalize recreational marijuana in the not-too-distant future. Thanks to the acquisition of Liberty Health Sciences, Ayr now has a strong presence in the medical cannabis market in Florida.
Compared to most of its peers, Ayr stock is practically dirt cheap. The price-to-sale multiple is currently below five. With the company’s revenue growth accelerating, I think Ayr is a stock that could realistically double in the second half of 2021.
Jushi Holdings
Jushi Holdings (OTC: JUSHF) stands out as another emerging US MSO. It currently operates in seven states, with particularly strong businesses in Pennsylvania and Illinois.
The company reported revenue of $32.3 million in the first quarter. This result reflected a 275% year-over-year growth and an increase of almost 30% from the previous quarter. Jushi posted positive adjusted EBITDA of $2.6 million.
I fully expect Jushi to maintain this momentum. The cannabis operator is expanding in several markets. The one I’m keeping a close eye on is Virginia. Jushi plans to open five medical cannabis dispensaries in the state by the end of 2022. Virginia’s recreational marijuana market is set to open in 2024.
Like Ayr, Jushi is a relative bargain compared to most marijuana stocks. The shares are currently trading at less than 5.4 times a 12-month lag. Jushi’s market cap remains under $1 billion, but I think this company will be worth a lot more than that in the coming years.
Planet 13 Holdings
There is simply no other company in the cannabis industry that is like this: Planet 13 Holdings (OTC:PLNH.F). Planet 13 operates a cannabis SuperStore on the famous Las Vegas Strip that has become a tourist destination.
The company posted revenue of $23.8 million in the first quarter, an increase of nearly 42% year-over-year. It posted adjusted EBITDA of $5.2 million. Those numbers are especially impressive given that the COVID-19 pandemic continues to weigh on tourist traffic to Las Vegas.
Planet 13 should enjoy accelerated growth as COVID concerns fade. It hopes to build a cannabis use lounge at its Las Vegas SuperStore after major Nevada legislation permitting such lounges is passed. The company is also launching its California Cannabis SuperStore in July.
This stock isn’t as cheap as Ayr and Jushi with a price-to-sale multiple of over 14. However, I think Planet 13 has plenty of room to run. And if the door opens for the company to list its shares on a major US exchange, Planet 13 won’t remain under-the-radar pot stock.
This article represents the opinion of the writer, who may disagree with the official recommendation of a premium consulting service from Motley Fool. Were fur! Questioning an investment thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.
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