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Raymond James Provides Commentary On Village Farms’ Recent Run-Up

Earlier this week, Raymond James released a note on Village Farms (TSX: VFF) (NASDAQ: VFF), in an attempt to answer some questions about the companies recent ~55% increase. They cite their earnings coverage of Village, where they highlight the massive price mismatch and say, “VFF is trading at 5x 2022 EV/EBITDA, while its peers average 29x: an event that should be catalytic for VFF’s share price.”

Rahul Sarugaser, Raymond’s cannabis analyst, says that the stock move is relatively clear to them. He explains that Village has never been able to consolidate its revenue with Pure Sunfarm’s as it was a joint venture, “so cannabis-focused EV/Revenue or EV/EBITDA multiples have been quite obscure: a barrier to investors who are not keeping close track of the story.”

Village was up roughly 9% in early morning trading yesterday.

This will all change in the first quarter of 2021, where Village will be able to fully consolidate their earnings to include Pure Sunfarms, which Sarugaser says, “will be catalytic.” He adds, “So, with its 3Q20 earnings, we believe investors finally started to take note of VFF’s deep fundamental strength and its deep discount relative to peers.”

Sarugaser asks and answers the question, “Where Do We Go From Here?” He says that the market values cannabis companies based on multiples of revenue. He says that the recent 55% run has helped close the valuation gap, but it’s, “certainly not enough to entirely eliminate the wide asymmetry that existed.” Village now trades at 5.9 times 2021 and 3.4 times 2022 EV/Revenue, which is roughly a 25% discount to peers.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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