As of September 18, 2023, Tilray Brands Inc (TLRY, Financial) experienced a daily loss of -6.31%, with a 3-month gain of 81.99%. Despite a reported Loss Per Share of 2.29, we aim to explore whether the stock is modestly undervalued. In this analysis, we will delve into the company's financials, growth prospects, and intrinsic value. Let's embark on this financial journey to discover the true value of Tilray Brands (TLRY).
Company Overview
Tilray Brands Inc (TLRY, Financial), a Canadian producer, engages in the cultivation and sale of medical and recreational cannabis. The company, originally known as Aphria, underwent a reverse merger in 2021 and rebranded itself as Tilray. The majority of its sales occur within Canada and the international medical cannabis export market, with U.S exposure limited to CBD products and alcohol. The current stock price stands at $2.75, with a market cap of $2 billion. The question arises: Is this price in line with the company's intrinsic value?
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line, visible on our summary page, represents the ideal fair trading value of the stock. If the stock price significantly deviates from the GF Value Line, it can indicate overvaluation or undervaluation, influencing future returns.
According to our calculations, Tilray Brands (TLRY, Financial) appears to be modestly undervalued. This conclusion is based on historical trading multiples, past business growth, and analyst estimates of future performance. With its current price of $2.75 per share and a market cap of $2 billion, Tilray Brands' future returns are likely to be higher than its business growth due to its relative undervaluation.
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Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To mitigate this risk, it's crucial to review a company's financial strength before purchasing shares. Key indicators such as the cash-to-debt ratio and interest coverage can provide valuable insights. With a cash-to-debt ratio of 0.76, Tilray Brands ranks lower than 52.27% of 1058 companies in the Drug Manufacturers industry. Its overall financial strength is rated 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies carries less risk, particularly if they have demonstrated consistent profitability over the long term. Tilray Brands has been profitable for 3 years over the past 10 years, generating revenues of $627.10 million in the past 12 months. However, with an operating margin of -29.11%, it ranks worse than 76.44% of 1044 companies in the Drug Manufacturers industry, indicating poor profitability.
Growth is a critical factor in a company's valuation. The 3-year average annual revenue growth rate of Tilray Brands is -18.5%, ranking lower than 88.64% of 924 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is -110.5%, which is worse than 98.88% of 889 companies in the industry.
ROIC vs WACC
By comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC), we can evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Tilray Brands' ROIC was -4.05, while its WACC came in at 17.53.
Conclusion
In conclusion, Tilray Brands (TLRY, Financial) appears to be modestly undervalued. The company's financial condition is fair, but its profitability is poor, and its growth ranks lower than 98.88% of 889 companies in the Drug Manufacturers industry. To learn more about Tilray Brands stock, check out its 30-Year Financials here.
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