Should You Buy Cresco Stock?

Cresco Labs is a multi-state operator in the business of cultivating  cannabis, manufacturing products derived from cannabis, and distributing these products to consumers. They have a focus on regulatory compliance and advanced agricultural practices. This cannabis stock peaked earlier this year – but should you buy Cresco stock?

Let’s take a closer look at the fundamentals and technicals to see if Cresco stock is a buy:

Cresco Labs Fundamentals

Profile

HQ: Chicago, IL, USA
Founded: 2013
Symbol: CRLBF (OTC), CL (CSE)

Company Focus: Strong

As a top quality cannabis producer, processor and retailer operating in ten US states, the company focuses on entering highly regulated markets with excessive demand potential and high barriers to entry. Cresco has elevated everyday cannabis through its THC-forward products available in flower, vape pens, and multiple forms of extracts.

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Cresco has 18 production facilities, 44 retail licenses, 32 operational dispensaries, massive revenues and a steady stream of acquisition announcements.  They have a consumer packaged goods mentality.

Cresco Company Size: Strong

Market Cap: US $2.95 billion
Enterprise Value: US $3.17 billion
# of employees: 2,300

Markets: Strong

Valuation: Strong

Current share price: US $13.03
52 week high/low: $3.24-17.49
Price to Sales: 5.85
EV/Revenue: 6.65
Price/book: 5.15

Financing: Neutral

Cresco has strong revenue but likes to acquire big names. This increases their debt some and explains some of their stock price hurdles. In December 2020, the company amended a previous loan to increase to $200 million.

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Principal amounts of 411.7 millions at 12.7% interest rates. These mature in January 2023. As of December 2020, they had $136.3 million in cash and cash equivalents.

Risks of Buying Cresco Stock: Medium

The risks of investing in any cannabis company are currently high given the newness of the market. The risks of investing in this company are less so given their multi-state presence and strong focus.

Bottom Line: Should You Buy Cresco Stock?

As a differentiated grower, processor and retailer of premium cannabis with operations in ten states, Cresco focuses on entering markets with out-sized demand potential, significant supply constraints and high barriers to entry. Cresco labs is one of the largest major producers of cannabis in the United States.

Cresco’s growth has been amazing. They have over 5,000 SKUs in over 700 dispensaries in the USA. This alone is impressive. Their national footprint is also impressive with 18 production facilities and 44 retail licenses.

Along with that huge presence, their acquisition strategies have also been large. In 2019 it was Origin House for $823 million. In 2021 it was Bluma Wellness in Florida for $213 million. Finally in 2021 it was Cultivate Processing for $90 million in Massachusetts. These gave Cresco huge presences in some of the largest markets in the USA.

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These large acquisitions have hurt their financials though with significant debt hitting their balance sheets. In 2020 they recorded revenue of $476 million, up 271% YoY. Their adjusted EBITDA was $116 million. Their total debt is at $185 million and they did finalize $200 million in loans in late 2020. But should you buy Cresco stock?

The debt and dilution are really the only things holding their stock price back currently. Their strong revenue, extremely well done brand names, and huge national footprint have them well placed to carryon. Watch for this stock price to raise in 2021. We give them a Strong rating.