Ascend Wellness AAWH stock is a cannabis stock I think has a lot of potential that is underappreciated. But, that also seems to be the case with every single cannabis company out there. Below is my AAWH Stock forecast. Current annual revenue is approximately $220M. 2022 projects are for $630M. That is a solid 200% increase YoY. But, it is not simply revenue increases for Ascend Wellness that are catching my eye. EBITDA profits are coming in ~24.5% for this year. However, Ascend Wellness management is expecting EBITDA profit margins to push upwards to 34.9% in 2022. That is a major increase in profits that will trickle down to the bottom line.
There are several other things that I like about Ascend Wellness that catch my eye. They have a strategic partnership with Lowell Farms. Lowell Farms is licensing its products to Ascend Wellness. And, Trulieve is involved in a licensing deal… I wonder if a licensing deal with Trulieve & Lowell could occur on a large-scale basis? But, being able to license & distribute a well-acclaimed product such as Lowell will have the added benefit of continually drawing in customers in search of great products at Ascend Wellness dispensaries. So, I expect continued increases in revenues from that.
I put together a video to start the process of analyzing Ascned Wellness. This is a company I will keep a sharp eye on because I think Ascend Wellness has a tremendous amount of upside potential.
Ascend Wellness AAWH Stock Forecast
There are some 169M shares outstanding of AAWH stock. Given that, looking at the potential of some 35% in EBTIDA profits, this should translate into a minimum of ~7.50% net earnings. That is approximately $0.36 EPS. But, I also see the potential for this to be slightly higher; maybe about $0.27 EPS.
Keep in mind that future revenues are moving higher at 200% YoY for 2022. The S&P 500 increases approximately 3.5% annually. Ascend Wellness will eclipse this massively. And, I really do not see any future earnings being priced into this stock whatsoever at this time.
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Ascend Wellness Financial Data
Here is a breakdown of Ascend Wellness Q3 financial data.
Ascend Wellness Gross Profits
We are still awaiting Ascend Wellness Q4 data for 2021; revenue should come in ~$220M. But, with the potential of $630M, that is an approximate 200% increase YoY. The average should be approximately $150M per quarter. I am expecting this to be a continuous incline of revenue growth throughout the year. After the $94.4M just printed, look for ~$110M in Q4, 2021. Then, look for continued increases in revenue which should move to nearly $200M in Q4 2022 to maintain the average.
For now, gross margins are on the lower side. However, to get to the ~34.9% EBTIDA rate, gross margins will have to increase. For now, Ascend Wellness’ roughly 45% rate is well below the very best performing cannabis companies. This is where the real earnings gains will be driven by. And, this makes sense as more and more product will move through production facilities as well as dispensaries. Since major costs are already being covered, new additional products moving through the system will have outsized margin gains versus the first products moving through. This is where Ascend Wellness’ profits are really going to be driven from. This will be the catalyst for AAWH stock.
Ascend Wellness Operating Profits
Operating profits are industry-leading. Companies printing between 30% – 35% are at the top of the pile. This shows that Ascend Wellness management is maintaining costs within operations. But, this metric is a mathematical equation derived from revenues. If Ascend Wellness revenues continue to increase then, this metric, Operating Efficiencies, will continue to improve (Move lower on a percentage basis). If Ascend Wellness were to hit its $630M revenue level and continually maintain industry-low operating costs, this percentage could easily push into sub-30 into the 20s.
These kinds of metrics tell me that management is experienced, savvy, and determined to create an ultra-competitive company. Music to my ears; AAWH stock will start to sing.
Ascend Wellness EBTIDA & Net Profits
Ascend Wellness EBITDA profits continually climb higher. That is in line with increases in revenues. However, on a percentage basis, EBITDA profits remain somewhat flat. The next step is that Ascend Wellness increases EBITDA profits beyond its current percentage by scaling up its business. This is the expectation for 2022.
From this, I can see Ascend Wellness net profits moving to positive this year. That eventuality should start to push AAWH stock higher.
Ascend Wellness Cash On Hand
Ascend Wellness Total Equity
Is AAWH Stock A Good Investment?
From a fundamental perspective, AAWH stock is a cannabis stock to buy now. I believe that fundamentals are going to become the driving force of pot stocks very soon. For now, outside influences are suppressing pot stocks. This will very likely change.
There are two things that I believe are going to drive cannabis stocks for 2022. First, cannabis federal legalization is set for 2022. This is a game-changer for cannabis investing. With cannabis federal legalization, opening the door for investors in other countries to start acquiring US MSO stocks. There could very easily be a rush into cannabis stocks.
Then, the other potential game-changer is Cannabis Cures COVID. This is such a seismic game-changer for cannabis investing. The evidence is already in and, there is also the new announcement that the government of Colombia via Flora Growth has received an application for approval of a cannabis product that cures & prevents COVID. Ummm… that will take the industry parabolic.
So, I see tremendous opportunities for the cannabis industry in general. Then, there is the fact that from an earnings perspective, Ascend Wellness has significant upside while at the same time, this is not priced into AAWH stock. Simply put, this is a stock that will see upside of some 400% – 500%.
I am seriously considering Ascend Wellness AAWH as a the next Top Pick.
Ascend Wellness Financial Data
Ascend Wellness AAWH Stock Financial Data
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