Tilray Brands Inc (TLRY, Financial) has been making waves in the stock market with a daily gain of 8.03% and an impressive 3-month gain of 103.77%. However, the company has a Loss Per Share of 2.29. This raises the question: Is the stock Fairly Valued? In this article, we will delve into Tilray Brands' financials and growth prospects to answer this question. We invite you to join us in this comprehensive analysis of Tilray Brands' valuation.
Company Introduction
Tilray Brands Inc (TLRY, Financial) is a Canadian producer that cultivates and sells medical and recreational cannabis. The company came into existence in 2021 when legacy Aphria acquired legacy Tilray in a reverse merger and renamed itself Tilray. The majority of its sales come from Canada and the international medical cannabis export market, with its U.S. exposure consisting of CBD products and alcohol. As of September 11, 2023, the company's stock price is $3.26, with a market cap of $2.40 billion. Comparing this price to its GuruFocus Fair Value (GF Value) of $3.54, the stock appears to be fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, Tilray Brands (TLRY, Financial) is estimated to be fairly valued. This means that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Tilray Brands has a cash-to-debt ratio of 0.76, which is worse than 51.91% of 1048 companies in the Drug Manufacturers industry. GuruFocus ranks the overall financial strength of Tilray Brands at 5 out of 10, which indicates that the financial strength of Tilray Brands is fair.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Tilray Brands has been profitable 3 over the past 10 years. Over the past twelve months, the company had a revenue of $627.10 million and Loss Per Share of $2.29. Its operating margin is -29.11%, which ranks worse than 76.33% of 1035 companies in the Drug Manufacturers industry. Overall, GuruFocus ranks the profitability of Tilray Brands at 4 out of 10, which indicates poor profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Tilray Brands is-18.5%, which ranks worse than 88.95% of 914 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is -110.5%, which ranks worse than 98.86% of 881 companies in the Drug Manufacturers industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Tilray Brands's return on invested capital is -4.05, and its cost of capital is 17.4.
Conclusion
In conclusion, the stock of Tilray Brands (TLRY, Financial) is estimated to be fairly valued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 98.86% of 881 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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