Sundial Growers Q3 Earnings: Is SNDL Still Expensive at 25x Price/Book?

in EARNINGS/INVESTING IDEAS by

Sundial Growers Inc. (NASDAQGS:SNDL) is a cannabis company with facilities in Canada and the United Kingdom. Sundial is a small-cap stock with a market capitalization of $358.5 million and a total enterprise value of $499.2 million.

Sundial completed its initial public offering (IPO) recently to commence trading on Nasdaq. The IPO issued 11 million common shares at USD $13.00/share to raise gross proceeds of USD 143,000,000. Management intends to use the proceeds from the IPO to invest in processing facilities, future acquisitions, and general corporate purposes.

As MarketWatch reported, it hasn’t been smooth sailing for the company since IPO. Another, Canadian cannabis company Zenabis Global (ZENA) disclosed that it had returned around $2 million of product from a “third party” that it did not mention by name. Zenabis returned the purchased cannabis because of poor quality, and people familiar with the matter identified the party as Sundial.

Sundial is scheduled to report Q3 earnings results on August 14, 2019 after trading hours. The company is expected to report earnings of -$0.09/share on revenue of $19.271 million. The consensus earnings per share (EPS) of -$0.09/share is based on a poll of 2 analysts.

After the last earnings report for the period ending June 30, 2019, the stock price reacted by falling by -12.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-28 $8.95 $7.86 -12.2% Decline

Fundamentals And Technical Analysis

Sundial Growers is currently trading at $3.56/share, down -6.6% ahead of earnings. The company is trading at approximately 27% of its 52 week high of $13.22/share. The company’s stock price is down -60.2% since the last earnings report and up 18.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 51.94 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of -5.6x and a forward P/E multiple of -11.5x.

Sundial Growers’s current share price also implies a price-to-book (P/B) multiple of 25.4x. The following table summarizes some other key fundamental ratios:

Data as of November 13, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $3.56
P/E Ratio -5.6x
P/E Ratio (Fwd) -11.5x
PEG Ratio 0.1
Total Debt to Capital (%) 31.3%
Levered Free Cash Flow -$181.7 million
Enterprise Value / EBITDA -16.3x

Company Profile: Sundial Growers Inc.

Sundial Growers Inc. engages in the production, distribution, and sale of cannabis for medical and adult recreational access in Canada. The company also focuses on supplying herbs and ornamental flowers, including basil, coriander, mint, dill, tulips, roses, and poinsettias in the United Kingdom. It serves the adult-use cannabis industry.

The company offers its products under the Sundial, Top Leaf, and BC Weed Co. brands. Sundial Growers Inc. has a development and licensing agreement with Crescita Therapeutics Inc. for the development of cannabis and hemp topical.

The company was incorporated in 2006 and is headquartered in Calgary, Canada.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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