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The Ancillary Pot Stocks Index consists of 7 companies that provide goods and/or services to American cannabis multi-state operators (MSOs) and Canadian licensed producers (LPs) and whose stocks trade for at least US$3/share, have a market cap of at least US$100M, and trade on one or more of the Canadian and/or American stock exchanges.

The non-tradable  munKNEE Ancillary Pot Stocks Index tracks the performance of the constituents for the week ending July 15th below, in descending order, since the end of May (6 weeks), and YTD with each stock's current Operating Cash Flow, Price-to Earnings (P/E) Ratio, Altman-Z Score, Piotroski F Score, Return on Equity (ROE) and Return on Assets (ROA). This information should help you assess the financial health of each company, how well the company is being managed and the extent to which the company is over- or under-valued compared to its peers. (Definitions of each metric are detailed at the bottom of the article.)

1. Forian (FORA): Was UP 13.6% for the week ending July 15th, is UP 83.9% since the end of May but is still DOWN 31.6% YTD.
   • Provides a suite of SaaS solutions, data management capabilities, and proprietary data and analytics to optimize and measure operational, clinical, and financial performance.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman Z-Score: 0.9 (less than 1% chance of financial distress in the next 2 years)
     • Piotroski F Score: 4
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
2. Turning Point Brands Inc. (TPB): Was UP 1.8% for the week ending July 15th, is DOWN 4% since the end of May and is now DOWN 26.5% YTD.
   • A manufacturer, marketer, and distributor of alternative smoking accessories and consumables with active ingredients through more than 210,000 retail outlets in North America.
     • Positive Operating Cash Flow: Yes
     • Price-to Earnings (P/E) Ratio: 3.9
     • Altman Z-Score: 2.4  (less than 1% chance of financial distress in the next 2 years)
     • Piotroski F Score: 6
     • Return on Equity (ROE): 33.7% 
     • Return on Assets (ROA): 7.2% 
3. AFC Gamma (AFCG): Was Unchanged for the week ending July 15th, is DOWN 11.4% since the end of May and is now DOWN 31.6% YTD.
   • A real estate finance company operating as a mortgage real estate investment trust (mREIT) to provide loans to marijuana operators.
     • Positive Operating Cash Flow: Yes
     • Price-to Earnings (P/E) Ratio: 0.9
     • Altman Z-Score: N/A - does not apply to banks and insurance companies.
     • Piotroski F Score: N/A
     • Return on Equity (ROE): 13.3%
     • Return on Assets (ROA): 8.9%
4. Scotts Miracle-Gro Company (SMG): Was DOWN 0.6% for the week ending July 15th, is DOWN 16.7% since the end of May and is now DOWN 50.1% YTD.
   • A marketer of consumer lawn and gardening products and, through its subsidiary Hawthorne Gardening, is a leader in hydroponic and indoor growing products for the cannabis industry.
     • Positive Operating Cash Flow: No
     • Price-to Earnings (P/E) Ratio: Negative
     • Altman Z-Score: 2.3  (less than 1% chance of financial distress in the next 2 years)
     • Piotroski F Score: 3
     • Return on Equity (ROE): 122.4%
     • Return on Assets (ROA): 19.3%
5. GrowGeneration Corp. (GRWG): Was DOWN 3.2% for the week ending July 15th, is DOWN 22.8% since the end of May and is now DOWN 67.8% YTD.
   • A retailer of organic nutrients and soils, advanced lighting technology, and state-of-the-art hydroponic equipment to commercial and home growers in 53 retail stores in the U.S.
     • Positive Operating Cash Flow: Yes
     • Price-to Earnings (P/E) Ratio: 210
     • Altman Z-Score: 3.3  (30% chance of financial distress in the next 2 years)
     • Piotroski F Score: 6
     • Return on Equity (ROE): Negative
     • Return on Assets (ROA): Negative
6. Hydrofarm Holdings Group Inc. (HYFM): Was DOWN 10.3% for the week ending July 15th, is DOWN 55.1% since the end of May and is now DOWN 88.6% YTD. A manufacturer and wholesaler of hydroponics equipment and commercial horticultural products in the lighting, climate control, nutrients, and growing media categories.
   • Positive Operating Cash Flow: No
   • Price-to Earnings (P/E) Ratio: Negative
   • Altman Z-Score: 0.7 (99% chance of financial distress in the next 2 years)
   • Piotroski F Score: 3
   • Return on Equity (ROE): Negative
   • Return on Assets (ROA): Negative
7. Innovative Industrial Properties Inc. (IIPR): Was DOWN 16.6% for the week ending July 15th, is DOWN 28.1% since the end of May and is now DOWN 63.6% YTD.
   • A real estate investment trust (REIT) engaged in the acquisition, ownership, and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities.
     • Positive Operating Cash Flow: Yes
     • Price-to Earnings (P/E) Ratio: 19.8
     • Altman Z-Score: 4.2  (less than 1% chance of financial distress in the next 2 years)
     • Piotroski F Score: 4
     • Return on Equity (ROE): 8.5%
     • Return on Assets (ROA): 6.7%

On average, the munKNEE Ancillary Pot Stock Index was DOWN 7.5% for the week ending July 15th, is DOWN 20.2% since the end of May and is now DOWN 56.4% YTD.

Definitions:

Operating Cash Flow:

• Is money involved directly with the production and sale of goods from ordinary operations or, in other words, money coming in through sales minus operating expenses.
• Without positive operating cash flow a business doesn’t survive and, as such, is the best measure of a company’s financial and operational health.

Price/Earnings (P/E) Ratio:

• Is a measure a company's share price to its earnings per share and has the most value when compared against similar companies in the same industry or for a single company across a period of time.
• Helps one determine whether a stock is overvalued (a high P/E) or undervalued (a low P/E) and can also be benchmarked against other stocks in the same industry or against the broader market.

The Altman-Z Score:

• Is a numerical measurement used to predict the chances of a business going bankrupt in the next two years and has an accuracy that ranges from 82% and 94%.
• Is based on five financial ratios - profitability, leverage, liquidity, solvency, and activity. 

The Piotroski F Score:

• Is a back-tested strategy that rates how strong the financial fundamentals are for a value stock and in back-testing of the system against the market between 1976 and 1996 the system it would have beaten the average return on the stock market by 13.4%.
• A score of 0-3 indicates that the company has weak fundamentals while a score of 8-9 indicates a company with powerful fundamentals that are most likely to keep performing well in the future.

Return on Equity (ROE)

• Is a measure of how many dollars of profit are generated as a percentage of each dollar of shareholder's equity and, as such, is a metric of how well the company utilizes its equity to generate profits.
• The higher the ROE, the better a company is at converting its equity financing into profits.

Return on Assets (ROA)

• Is a measure that indicates how profitable a company's net income is as a percentage of its total assets and, as such, factors in a company's debt while return on equity does not.
• A higher ROA means a company is more efficient and productive at managing its balance sheet to generate profits while a lower ROA indicates there is room for improvement.

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