Growth And Business Structure Set Cannabis Producer Trulieve On Solid Course
Investing.com | Nov 23, 2021 16:42
On the surface, it sounds repetitive to say that every company in the cannabis industry is awaiting federal legislation in the US that will legalize marijuana. But that's the only show in town when it comes to this sector. So much hinges on it. And the fates of so many companies will be determined by how they will fare once this mega market opens up.
That's why so many investors are paying very close attention to how these companies are positioned in order to take advantage of the game-changing opportunity when it arrives. And the clock is ticking louder and louder as that eventuality nears.
One company that appears well prepared is Trulieve (OTC:TCNNF) (CSE:TRUL). The Florida-based cannabis producer has shown steady growth, and it has good corporate structure.
Shares of Trulieve peaked on news of its latest earnings, issued last week, hitting a recent high of $33.61. But they have since retreated somewhat, closing yesterday at $27.40, down about 5.5% on the day.
Still, in the last year, the stock has gained more than 16.5%. It’s an impressive measure in a tough market that could see some big winners down the road.
Here's what puts Trulieve in good standing:
First, let’s look at its growth.
Last week, the company unveiled its latest quarterly earnings , which showed a 64% gain in year-over-year revenue. That figure now sits at $224.1 million. The gain beat analysts’ expectations.
The company’s gross profit also made substantial gains, jumping 68.7% to hit $153.9 million for the latest quarter that ended Sept. 30. That is up from $102.2 million in the same quarter last year.
Its profit also saw a nice jump—7% to $18.6 million for the quarter, despite a $16.4-million one-time transition cost writedown.
Now, let’s look at the company's structure.
The business is one of the few US-based pot firms that is vertically integrated, which means it controls the entire process, from growing to marketing what consumers buy. It is also a multi-state operator. This has allowed the company to grow steadily where it can. And it has been successful in doing just that. Today, it is the biggest cannabis retailer in the US.
Trulieve has moved from its roots as a medical marijuana company, branching out to play a leading role in the recreational market.
It is also expanding in other ways. Last month it completed its $2.1-billion purchase of Harvest Health and Recreation, a medical marijuana company. This is where its recent $16.4-million one-time writedown came in.
But the new acquisition is already growing. In the last quarter, Trulieve opened 13 new dispensaries under the Harvest banner. Together they operate 155 stores and 3.5 million square feet of growing space.
Being vertically integrated—like the big Canadian operators—puts Trulieve in a better position to take full advantage of the opportunity to expand when federal legalization kicks into force. It's poised to be able to control its inventory and expand retail operations.
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