As of September 6, 2023, Tilray Brands Inc (TLRY, Financial) has seen a daily loss of 7.44%, with a 3-month gain of 63.56%. Despite this, the company has a reported Loss Per Share of 2.29. This raises the question: is the stock modestly undervalued? This article aims to provide an in-depth analysis of Tilray Brands' valuation to answer this question.
Company Overview
Tilray Brands Inc (TLRY, Financial), a Canadian producer of medical and recreational cannabis, was formed in 2021 when legacy Aphria acquired legacy Tilray in a reverse merger. The company's main markets are in Canada and the international medical cannabis export market, with exposure in the U.S. through CBD products and alcohol. As of the date of this analysis, the company's stock price stands at $2.86 per share, with a market cap of $2.10 billion. When compared to the GuruFocus Fair Value (GF Value) of $3.58, the stock appears to be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to our calculation, Tilray Brands (TLRY, Financial) appears to be modestly undervalued. This implies that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength of Tilray Brands
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's important to review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. Tilray Brands has a cash-to-debt ratio of 0.76, which ranks worse than 52.23% of 1053 companies in the Drug Manufacturers industry. The overall financial strength of Tilray Brands is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Tilray Brands has been profitable 3 times over the past 10 years. Over the past twelve months, the company had a revenue of $627.10 million and a Loss Per Share of $2.29. Its operating margin is -29.11%, which ranks worse than 76.21% of 1034 companies in the Drug Manufacturers industry. Overall, the profitability of Tilray Brands is ranked 4 out of 10, indicating poor profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Tilray Brands is -18.5%, which ranks worse than 89.14% of 912 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is -110.5%, which ranks worse than 98.87% of 883 companies in the Drug Manufacturers industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Tilray Brands' return on invested capital is -4.05, and its cost of capital is 17.33.
Conclusion
In conclusion, the stock of Tilray Brands (TLRY, Financial) appears to be modestly undervalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 98.87% of 883 companies in the Drug Manufacturers industry. To learn more about Tilray Brands stock, you can check out its 30-Year Financials here.
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