The stock of Curaleaf Holdings (OTCPK:CURLF, 30-year Financials) shows every sign of being modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $15.24 per share and the market cap of $10.5 billion, Curaleaf Holdings stock shows every sign of being modestly undervalued. GF Value for Curaleaf Holdings is shown in the chart below.
Because Curaleaf Holdings is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 166.7% over the past three years and is estimated to grow 112.41% annually over the next three to five years.
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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. Curaleaf Holdings has a cash-to-debt ratio of 0.13, which is worse than 84% of the companies in Drug Manufacturers industry. GuruFocus ranks the overall financial strength of Curaleaf Holdings at 5 out of 10, which indicates that the financial strength of Curaleaf Holdings is fair. This is the debt and cash of Curaleaf Holdings over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Curaleaf Holdings has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $626.6 million and loss of $0.094 a share. Its operating margin is 10.17%, which ranks in the middle range of the companies in Drug Manufacturers industry. Overall, the profitability of Curaleaf Holdings is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Curaleaf Holdings over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance 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 Curaleaf Holdings is 166.7%, which ranks better than 98% of the companies in Drug Manufacturers industry. The 3-year average EBITDA growth rate is 335.5%, which ranks better than 100% of the companies in 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, Curaleaf Holdings's return on invested capital is -12.41, and its cost of capital is -167.84. The historical ROIC vs WACC comparison of Curaleaf Holdings is shown below:
In conclusion, the stock of Curaleaf Holdings (OTCPK:CURLF, 30-year Financials) is believed to be modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks better than 100% of the companies in Drug Manufacturers industry. To learn more about Curaleaf Holdings stock, you can check out its 30-year Financials here.
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