The United States’ cannabis market is expected to hit $50 billion by 2030, and the top ten pot stocks are set for an impressive growth. This U.S.-focused marijuana stock offers investors a unique opportunity because it serves both medical and recreational markets in addition to being well-positioned now for full legalization of adult-use weed at the federal level soon.
The “growth generation stock” is a company that has been in the cannabis industry for quite some time. The company’s website states that it has been able to generate growth year after year, and the company has had an impressive run of growth over the last three years.
The development of the cannabis business in the United States has piqued the interest of both consumers and investors. State by state, legalization is gaining traction, as is societal acceptability at the federal level. GrowGeneration (NASDAQ: GRWG) is a prospective investment for investors seeking for a wide view of the cannabis industry in the United States. GrowGeneration is well-positioned to flourish in the future years for three reasons.
1. Cannabis legislation is quickly evolving.
Colorado and Washington were the first states to legalize marijuana for recreational use in 2012. Since then, the movement has gained traction throughout the country. Cannabis is currently legal in 19 states for recreational use, while 36 states have authorized it for medical usage.
According to Flowhub, a cannabis technology firm, the U.S. cannabis business is now worth $61 billion, and considering that the majority of consumers are in young, developing demographics, that figure is certain to rise. Millennials or Generation Z account for 65 percent of recreational users and 59 percent of therapeutic users.
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Increased demand may encourage more people to cultivate their own cannabis, which is legal in many jurisdictions. Cannabis cultivation is now allowed in 18 states, so both private and commercial cultivation may be on the increase.
GrowGeneration is a specialized store that may be compared to a Home Depot for marijuana. The business has 53 locations (with more on the way) spread across 12 states. It offers various types of growing equipment and supplies, such as temperature controls, lights, soils, fertilizer, and additives.
Same-store sales are up 51% in the first quarter of 2021 over the first quarter of 2020, according to the business. Same-store sales indicate how much more money a company’s current footprint generates, and when they rise, it’s a sign that customers are purchasing more often.
GrowGeneration, on the other hand, is growing its store count rapidly, both organically and via acquisitions. The business announced an agreement to buy HGS Hydro, a Michigan-based hydroponics store, in July (terms were undisclosed). GrowGeneration’s yearly sales would grow by $50 million as a result of the acquisition, and the company’s total store count will rise to 65.
GrowGeneration plans to open 100 shops by 2023, which may result in a substantial boost in revenue, particularly given the company’s excellent same-store sales growth. Management expects $460 million in sales for the entire year of 2021, up 138 percent from the previous year.
3. Financials that are solid will continue to be strong.
GrowGeneration is already profitable, unlike many other rapidly expanding businesses that lose money because they spend so much to drive that expansion. The business earned $19.2 million in positive profits before interest, taxes, depreciation, and amortization (EBITDA) in 2020, and management anticipates that figure to increase by 202 percent to $58 million in 2021, indicating that profit growth is speeding up.
This is particularly significant since GrowGeneration utilizes acquisitions to help grow its retail presence; being profitable enables management to finance these moves directly rather than diluting investors by issuing shares to acquire money. The company spent $39 million on acquisitions in Q1 2021, leaving it with $92 million in cash and equivalents on its financial sheet. Investors should keep a watch on how much cash the company goes through to determine whether a stock offering is required.
The bottom line is this:
GrowGeneration isn’t the only company selling cannabis products. Many small “mom and pop” shops compete with it, while big-box rivals like Home Depot and Lowe’s also sell hydroponic gardening materials. GrowGeneration’s emphasis as a specialist store, on the other hand, may be able to help it continue its growth, and its product selection and expertise should be beneficial.
With management’s 2021 forecast, the stock has a market value of only $2.5 billion and trades at a price-to-sales ratio of 5.8. Given its faster growth and smaller size, GrowGeneration seems to be undervalued compared to larger (and slower-growing) rival Home Depot, which trades at a comparable P/S of 2.4.
Investors should pay attention to the company’s growth goals and how it implements them. A significant decrease in growth may indicate that GrowGeneration’s company is being eroded by rivals, but this does not seem to be the case at this time. Investors may see the stock’s price rise in tandem with same-store sales and store count growth over the next several years.
The “growgeneration news” is a site that provides information about the cannabis industry. The website has been providing valuable insight into the market for some time now, and it might be worth looking into this stock if you are interested in investing in the U.S. Cannabis Industry.
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