Over the next 6 years, Canopy Growth shares will need to reach $17 to achieve average annual stock market performance of 9.0%. Canopy Growth’s stock price will need to reach $20 by 2029 to achieve upper quartile performance. What is the market’s view of Canopy Growth’s future operating performance as reflected in the current price of $10?
Executive Summary
- Price Target Research identifies Canopy Growth as having: above average financial strength, below average expected growth, and very low profitability. A big negative influence on Canopy Growth’s valuation is its poor Growth.
- Average valuation, leading shareholder returns. Current valuation levels are average relative to the Canopy Growth Peer Group. Recent market returns have significantly outperformed the Canopy Growth Peer Group. Total shareholder returns expected to seriously lag the overall equity market. Based on current investor expectations, Canopy Growth shares should reach a level of $15 by 2029 — an 6.3% per year total shareholder return. A 2029 stock price of $17 would reflect median performance and a price of $20 would be required to reach upper quartile performance.
- Growth has been Canopy Growth’s biggest valuation weakness. Historical growth has been below average relative to the Canopy Growth Peer Group and forecasted growth is relatively average. EPS Growth, and Asset Growth have lagged. These factors have negatively affected market perceptions of Canopy Growth. Canopy Growth’s historical income statement and balance sheet growth are not available.
- Return on Equity, and Pretax ROA are group lagging. These factors have negatively affected market perceptions of Canopy Growth. The company has normal cash needs.
- Canopy Growth’s risk profile is unfavorable. Overall variability has been very high with very high revenue variability, Financial Strength is relatively high and earnings’ expectations are only average. The debt/capital ratio has risen very significantly.
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