SNDL (NASDAQ:SNDL), formerly known as Sundial Growers, is shaping up to be a decent buy for value-sensitive investors. Between the improving efficiency of its operations, its booming investment income, and its continued attempt to invest in companies competing in the U.S. marijuana markets, shareholders have no shortage of favorable trends and catalysts to appreciate.
And things could get even better in the coming quarters. Here’s what you need to know.
Conditions are ripe to reap significant returns on investments in the United States
The story of SNDL over the past two years is one of diversification.
Once a Canadian-only marijuana cultivation and sales operation, SNDL is now also the country’s largest privately owned alcohol retailer, and its SunStream Bancorp division is a major investment bank in the North American marijuana industry. cannabis. Its investments only generated an operating profit of just CA$13 million in the first quarter, but it’s actually the company’s most profitable segment, at least for now. Although it brought in CA$116 million from alcohol sales and over CA$71 million in cannabis sales, only alcohol was profitable, with just over CA$2 million in profit from exploitation.
It may well be that its investment activities generate significantly more profits. SunStream Bancorp buys the debt of marijuana companies in the United States and Canada and, in some cases, invests directly in them to secure a portion of their equity. Its portfolio is worth around CA$560 million and, as long as its debtors are good about their liquidity, it will enjoy a stream of interest income for the foreseeable future.
If legalization of cannabis If rescheduling policies continue in the United States, SunStream is already positioned to thrive by providing loans to potential new industry entrants. But even if that doesn’t happen, U.S. marijuana players will still be quite capital hungry to grow in the state-level markets in which they currently compete, absent banking reforms.
So, all SunStream needs to do to secure low-cost income is secure its loans and choose its investments carefully. Therefore, unless the North American marijuana industry somehow repeats its (temporary) collapse at the end of 2021, SNDL clearly has a path forward to become increasingly profitable, even if it does not seek to further improve its operational efficiency.
And that could easily send the stock higher and higher.
This stock is currently valued at a favorable price
Another key factor in SNDL’s stock performance for the remainder of 2024 may well be its very low price. assessment.
Currently, the company’s price-to-book (P/B) multiple is 0.6 and its price-to-sales (P/S) ratio is just 0.8. In summary, its P/B less than 1 indicates that the stock’s price does not fully reflect the underlying value of its assets. Likewise, its P/S below 1 suggests that the market is not fully pricing in its earnings.
Both measures point to the idea of…
