Curaleaf Stock Continues to Outperform on Improving Fundamentals

Curaleaf stock

After many cannabis stocks seemed to rebound in the New Year, the sector fell into a bit of chaos last week after many announcements of layoffs and departures of important executives. Many stocks tanked during the period. However, Curaleaf stock has gone against the grain of the market and, in fact, registered gains of as much as 40% over the course of the past three months.

In such a situation, it is important to take a closer look at Curaleaf Holdings (CSE:CURA) (OTCQX:CURLF) to see why it's climbing.

Solid Earnings

The main trigger behind the sustained rally in Curaleaf stock was the company’s performance in the third quarter last year when it generated a record-breaking revenue of $61.8 million. Moreover, despite the net loss of $7.4 million, the company posted a positive EBITDA of $9 million. The loss is fairly manageable, and the adjusted EBITDA is an indication of the fact that the company is heading in the right direction.

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Considering the struggle of cannabis companies in recent times, Curaleaf Holdings has managed to stand out through prudent allocation of resources. Its expenses in the first nine months of 2019 stood at $20 million, which is a slight rise from the $16 million the company spent a year ago.

At the time of writing, Curaleaf stock is up by 0.83% at C$8.54.

At this point in time, the stock is trading at 16.50 times its forward sales, and that valuation is not particularly cheap, considering the standards of the cannabis space. For instance, Curaleaf’s competitor Acreage Holdings currently trades at 8 times its forward sales. Therefore, Curaleaf stock's performance in the near term is going to depend heavily on its performance in the fourth quarter.

While it is true that the company can continue to grow, Curaleaf stock is still trading at expensive valuations. Experts believe that investors should wait until Curaleaf Holdings can bring its cash burn under control.

What do you think?

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