When it comes to assessing the financial health of Cannabis companies, the age-old question of leverage inevitably crops up. The standard metric of Debt/EBITDA is a familiar yardstick. However, the inimitable minds at Viridian suggest that Total Liabilities / Market Cap offers a more insightful perspective. This metric not only steers clear of accounting sleights of hand but also instantly mirrors the market’s golden estimation of asset worth over and above liabilities. An impervious measure that smoothly adapts to the winds of change in investor sentiment.
Yet, for those favoring a trusty accounting-based metric, Viridian hasn’t neglected you. In fact, the Viridian Capital Credit Tracker model elegantly weaves in these ratios. The urbane team is now honing a fresh measure that operates on some core tenets.
The Resonance of Lease and Tax Dynamics
In the current economic landscape, leases form a substantial chunk of the capital framework for many cannabis corporations and merit treatment akin to debt. Lease liabilities loom large, constituting a significant portion of the combined debt and leases at various key players in the industry. In honing an astute perspective, Viridian incorporates lease expenses into EBITDA to derive a more refined metric, EBITDAR.
Considering the burgeoning trend of cannabis companies deferring tax payments and effectively borrowing from the government at preferential rates, Viridian includes accrued tax liabilities exceeding a quarter of tax expense as debt, regardless of the official classification accorded by the company. Adjusted net debt, as calculated by Viridian, encompasses leases and excess taxes in addition to the conventional debt minus cash, thus offering a more holistic financial view.
Charting a New Course in Valuation
On the path to enhanced valuation insight, Viridian proposes a recalibrated Enterprise Value that fuses the adjusted net debt with market cap. This fusion underpins a refined EBITDA denominator in the EV/EBITDAR ratio, lending a sharper edge to the traditional valuation metrics.
The graph unveiled by Viridian illuminates the baseline values for these fresh perspectives on leverage and valuation metrics. By integrating leases and taxes, the metrics tend to skew towards higher yardsticks. These refined metrics, shedding light on the intricate financial web woven by cannabis companies, are a clarion call for investors seeking a more authentic reflection of the financial tapestry.
Unveiling Investment Insights with Viridian
The Viridian Capital Chart of the Week serves as a beacon, illuminating crucial investment, valuation, and M&A trends distilled from the Viridian Cannabis Deal Tracker. This comprehensive toolkit encapsulates the pulse of capital raise and M&A activity in the vivid realms of legal cannabis, CBD, and psychedelics.
Viridian Cannabis Deal Tracker: A Saga of Financial Revelation
Since its inception, the Viridian Cannabis Deal Tracker has unfurled over 2,500 capital raises and 1,000 M&A transactions, painting a canvas of financial transactions valued at over $50 billion. A testament to meticulous scrutiny and financial acumen, the Tracker meditates on the myriad facets of financial maneuvers in these burgeoning sectors.