9 Of The 12 Largest American Cannabis MSOs Have A +50% Likelihood Of Going Bust

The most critical financial information on the health of a company is whether, or not, it has a Net Positive Operating Cash Flow; its Altman -Z Score; and the percentage probability that it could go bankrupt within the next 2 years (definitions at end of article). Below is a ranking, in descending order, of the 12 constituents in the  munKNEE American Cannabis MSOs Index, according to data from macroaxis.com, as well as their stock performance year-to-date (February 24th):

  1. Green Thumb (GTBIF): Up 1.1% YTD
  2. Curaleaf (CURLF): Down 6.1% YTD​​​​​​​
  3. Planet 13 (PLNHF): Up 27.5% YTD
  4. ​​​​​​​​​​​​​​Verano (VRNOF): Down 3.2% YTD​​​​​​​
    • has a market capitalization of​​​​​​​ $1,090M;
    • has a 64% Chance of Financial Distress within 2 years;
    • has a 1.8 Altman Z-Score.
    • Read: Verano Q3 Financial Report Reveals Major Increase In Net Loss
  5. TerrAscend (TRSSF): Up 54.5% YTD
  6. Trulieve (TCNNF): Down 18.0% YTD​​​​​​​
  7. Jushi (JUSHF): Down 5.4% YTD​​​​​​​
  8. Columbia Care (CCHWF): Down 16.0% YTD
  9. Ascend (AAWH): Up 10.8% YTD​​​​​​​
  10. Cresco Labs (CRLBF): No Change YTD​​​​​​​
  11. Acreage (ACRDF/ACRHF): Up 18.3% YTD
  12. ​​​​​​​​​​​​​​Ayr (AYRWF): Down 4.1% YTD​​​​​​​

The munKNEE American Cannabis MSO Stocks Index is now DOWN 2.99 % YTD. In comparison, the munKNEE  Canadian Cannabis LP Stocks Index is now DOWN 2.96% YTD while the publicly traded AdvisorShares Pure US Cannabis ETF - which is 96% MSOs - is DOWN 5.2% YTD.

Below are the definitions for Positive Net Operating Cash Flow and the Altman Z-Score:

  • Positive Net Operating Cash Flow:
    •  is money coming in through sales minus operating expenses and a company doesn't survive without it. As such, it is the best measure of a company’s financial and operational health.
  • The Altman Z-Score:
    • is a numerical measurement used to predict the chances of a business going bankrupt in the next two years compared to a company in a similar line of business and has an accuracy that ranges from 82% and 94%.
      • companies with Z-Scores above 3.1 are generally considered to be stable and healthy with a low probability of bankruptcy,
      • scores that fall between 1.8 and 3.1 lie in a so-called 'grey area' and
      • scores of less than 1 indicate a high probability of distress.

More By This Author:

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"Rags-To-Riches" Portfolio Underperforming YTD

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Seeking Alpha Reader 1 year ago Member's comment

Just to make sure I understand... the author suggests that the altman-z score is a predictor of stability and suggest that Planet 13 is in fact a pretty stable bet, right?

Frank J. Williams 1 year ago Member's comment

It's a good article, but the author is assuming no fed legalization, and no safe banking act within the next two years... which I don’t see happening. Corporate cannabis needs safe banking and institutional financing for balance sheets to improve. All in due time (my guess: less than 2 years).

Alexandra Gray 1 year ago Member's comment

Agreed.