Is Trulieve Cannabis a Good Buy Before Profit?

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The marijuana boom sparked by the pandemic made the U.S. cannabis industry sparkle. Based in Florida Trulieve cannabis (OTC: TCNNF)Investors in particular impressed investors with their outstanding performance over the past year. The stock gained a whopping 167% compared to the industry benchmark Horizons Marijuana Life Sciences ETFLoss of 10%. I am not surprised at this dramatic increase. The speed with which the company continued to expand its business operations and at the same time increase its sales – and at the same time achieved consistently positive earnings before interest, taxes, depreciation and amortization (EBITDA) – caused the share to rise.

Trulieve management already has high hopes for 2021. The company will announce its first quarter results (ending March 31) on Thursday. Let’s recap last year’s performance, take a look at what’s going on this year, and find out why it’s not too late to add this tempting stock to your portfolio.

Image source: Getty Images.

Trulieve had an amazing 2020

Trulieve Cannabis is a vertically integrated marijuana company that enabled it to survive and thrive amid the pandemic while many small businesses struggled not to go bankrupt. Vertical integration allows a company to control its supply chain, which means that Trulieve did not see any disruption to the process from production to sale even during the coronavirus crisis. The high demand for cannabis was the icing on the cake, and the company produced and sold more in 2020. As a result, full-year 2020 revenue increased 106% year over year to $ 521.5 million. At the end of 2020, sales rose to a total of 75 pharmacies in Germany.

2021 could be even better for this pot supply

Trulieve’s management is very optimistic that 2021 could be another rocking year. They expect the company’s revenue to grow about 63% year over year to $ 815 million to $ 850 million in 2021. Adjusted EBITDA could be anywhere between $ 355 million and $ 375 million.

Investors used to worry about Trulieve’s heavy reliance on medicinal cannabis. But I think it was wise of the company to strengthen its position in the medical cannabis market in its home state. This dominance of the state market will help it make a name for itself when Florida legalizes recreational cannabis. Florida lawmakers tabled a bill in January to legalize adult marijuana.

Trulieve’s strategy in West Virginia is the same as in his home state. That year, the company acquired Mountaineer Holdings and Solevo Wellness West Virginia, making nine pharmacies in West Virginia. The state already allows medical marijuana, but has not seen any developments in recreational use.

Trulieve is also expanding its medical cannabis footprint in Pennsylvania. In April, the company acquired three medical pharmacies in the state of Keystone Shops. In its fourth quarter earnings call, management stated that investments in government will “make a significant contribution to our revenue plan for 2021”.

Pennsylvania has not yet taken any steps towards legalizing recreational pots. But neighbors New York and New Jersey have legalized recreational marijuana, which could force state lawmakers to do the same. Meanwhile, by consolidating its position in both West Virginia and Pennsylvania, Trulieve gives Trulieve a competitive edge over peers when recreational activities are legalized and sales begin. The company has been operating 83 branches across the country since April – eight new branches will be added in just four months.

And there’s more good news regarding Trulieve’s recent entry into the recreational market: In the third quarter, some high-margin cannabis derivatives – including gels, chocolates, cookies, and brownies – were launched for medical cannabis patients in Florida with these products be ready when more states legalize the recreational pot.

What makes me particularly optimistic about this pot stock is the mega-merger deal announced on Monday. The company acquires Harvest health & recreation in an all-stock deal. This $ 2.1 billion acquisition makes Trulieve the proud owner of a total of 126 pharmacies operating in 11 states with 3.1 million square feet of cultivation and manufacturing facilities. Imagine the powerhouse of a company that this pot inventory is set to become in 2021 and beyond.

Green lights abound

Higher sales and lower costs helped the company post consistently positive EBITDA for all quarters of 2020. A positive EBITDA means that the company is managing its operating costs well. Meanwhile, net profit is a company’s total profit after all deductions. Trulieve has managed to make a profit, which is a rare attribute for marijuana companies. Adjusted EBITDA increased 99% year over year to $ 251 million while reporting net income of $ 63 million for the full year. It ended the year with $ 146.7 million in cash and $ 82 million in debt. With these steady profits, I have no doubt that the company will be able to pay off its debts.

With upcoming earnings, investors should look to see if earnings have remained stable despite lower costs and a strong balance sheet. Trulieve looks poised to continue its winning streak in 2021. The 2020 performance proved it has what it takes to be one of the strongest competitors in the marijuana space. The excellent sales growth, the expansion of the national presence, the sustained positive EBITDA, smart growth strategies and the strong balance sheet give you a strong reason to invest in this cannabis stock now.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.