On of my Top Picks – Jushi Holdings, is a quiet company that does not make a lot of waves with being a top producer or top growth rate. Despite that, Jushi Holdings is solid. Revenue growth is expected to climb over the next two years and with rescheduling of cannabis to Schedule III, profits will expand. This continually adds to what could be a solid long term value investment.
With solid margins – and the potential of more after rescheduling, profit margins are already getting to the point where upside is all but assured. However, total equity has been weakened with continued drawdowns from the asset base as well as increasing total liabilities relative to total assets.
But, after the shift in rescheduling, I see Jushi growing and becoming profitable. Because of that JUSHF stock is likely to see a continued move higher over a very long term.
Revenue for 2023 grew overall within the industry, but JUSHF stock did not – a slight dip from 4284M down to $278M. In 2024, however, revenue growth is expected to start heading back up from increased dispensaries along with increased organic growth from same-store sales. This is further expected through 2025. Increasing revenue growth is a key element of what I am looking for with a value investment.
Margins are the next thing I look toward after seeing the revenue growth rates. Overall gross margins for the industry are ~45%. Jushi Holdings is on target with industry contemporaries. All of these companies are likely to see their gross margins increase somewhat after rescheduling – if, but a few points – as companies will be allowed to write down certain costs of doing business. Since Jushi is already in line with the industry, any moves higher in gross margins from rescheduling are going to improve overall margins and from there this will set the new norm that the poorer performers will be measured against.
At the same time, as time goes by, organic sales at same-stores will increase as more and more converts switch to Jushi products. This organic sales conversions are important because input costs are negligible to getting new conversions from newer consumers. Same store sales will increase organically. The cost of acquiring these new sales is low comparatively. At the same time, the increased foot traffic into a store that is already able to pay fixed costs means margins profits increase increasingly.
Operating margins are solid and outperform the broader industry. And, with rescheduling, this will be a standout portion of the income statement. If Jushi Holdings is already ahead of the pack in this area – while simultaneously being in line with gross margins, this is where Jushi Holdings will stand out and create an increasing bottom line versus others within the industry.
Growth in EBITDA should increase after rescheduling. Costs will decrease as companies are able to write down costs versus taxable income. There should be increases in EBITDA. And, if Jushi Holdings continues its current trajectory with rising revenues and overall outperforming margins, EBITDA will continually increase. This all adds up on the bottom line and will reduce the need to borrow more and more, balancing out assets less liabilities.
This is likely the one area of Jushi Holdings balance sheet that I am most concerned with as total equity is dwindling. If, after rescheduling, Jushi Holdings can minimize losses more and more on a quarterly basis, while simultaneously increase same-store sales organically, total equity will start to rise more and more as liabilities grow at a lower level. That is the future of a company. The ability of one company to add more and more equity to its balance sheet means it will have the ability to drive investor value.
Jushi Holdings JUSHF stock
There was a small pop higher with Jushi Holdings after the HHS announcement for rescheduling as its recommendation. Many US MSOs popped higher. Since then, nearly all of these stocks – including MSOS stock, are sliding closer and closer to the price it was trading just prior to the HHS announcement.
After the point forward from the DEA announcement and an executive order being signed, individually each company will be a value investment and you would look at each stock respectively. Some cannabis stocks are going to increase in value and some cannabis companies are simply not going to make it.
Jushi Holdings is a company that will be able to continue to grow and build its business. With continued growth in revenues, margins will continually improve. The eventuality is that Jushi Holdings will become a profitable company. And, JUSHF stock will continually increase in value. While most of us invested in the hype of ‘Green Gold’ when the industry began, the reality is now upon us that the process of these companies becoming legitimate are here.
I look for JUSHF stock to start a long slow move upward over time.