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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry and exit points. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA. Invest with Stone Fox Capital's model Net Payout Yields portfolio on IB Asset Management as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here: Follow Mark on twitter: @stonefoxcapital

Trulieve Cannabis Is a Compelling Investment Story

Anybody frustrated with the valuation of the Canadian cannabis players can find dozens of developing U.S. cannabis companies such as Trulieve Cannabis (TCNNF) (TRUL.CN) with more reasonable valuations. The Florida dispensary operator even offers a more simple investment thesis that should have real appeal to investors.

Real Profits

As an American company, Trulieve offers the benefit to U.S. investors of reporting financials in U.S. dollars. Investors don’t have to worry about converting results from Canadian dollars to get the full view of the company.

The added benefit is that a company like Trulieve generates more normalized results having already somewhat exited the wild investment phase. The lack of irrational global expansion helps keep costs low for the domestic players where entering new states don’t have the same costs of going global.

For Q4, the company reported that revenues surged 172% from last Q4 to $35.9 million. Revenues were up $7.6 million sequentially from $28.3 million in Q3.

The more impressive side is the ability to generate $15.2 million in adjusted EBITDA and $10.4 million in operating income. Again, Trulieve has reasonable operating expenses that are only 29% of revenues.

The company operates 26 of the 108 dispensaries in the state of Florida with the ability to further expand in the sunshine state. The good news is that the growth story doesn’t end here.

Same Expansion Opportunity

The purchase of Life Essence in Massachusetts and Leef Industries in California sets Trulieve up to become a multi-state operator or MSO. The term is likely to become synonymous with the more attractive cannabis operators having the scale and market opportunity that exceeds Canadian players that are still mostly tied to limited Canadian sales.

Along with growth in Florida, these acquisitions are leading to some impressive financial targets for 2019 as follows:

  • Revenues to grow 108% to ~$214 million.
  • Gross profit of ~$145 million, or 68% of revenues.
  • Adjusted EBITDA of ~$92 million, or 43% of revenues.

The numbers are indeed impressive coming from a company without a lot of market attention. The OTC ticker “TCNNF” only trades about 200,000 shares on a daily basis so investors aren’t very familiar with the name as of yet.

The market valuation isn’t exactly cheap at $1.66 billion or a P/S multiple of 7.8x. Though, the stock does offer a rare cannabis investment that trades at a reasonable 18.0x adjusted EBITDA targets while revenues are doubling.

The biggest question will be the ability of Trulieve to reach those lofty EBITDA margins of 43% in a highly competitive market. A push to eliminate dispensary caps in Florida could have a meaningful impact on profit margins in the future.


The key investor takeaway is that Trulieve Cannabis trades at a reasonable valuation compared to internal company expectations for 2019. The stock should start garnering more investor attention as the year progresses and the company becomes a full-fledged MSO.

Eventually, the American companies are likely to gain access to major stock exchange listings providing additional catalysts for the stocks. Along with the expansion opportunities of MSOs that will likely include new state opportunities as additional states approve the legalization of cannabis, the stocks like Trulieve offer the best way to play the cannabis craze.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.


Disclosure: The author has no position in Trulieve Cannabis stock.


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