AYR Wellness, AYRWF stock, is one of those cannabis stocks that has a lot of potential to really grow significantly and, I wanted to update the AYRWF Stock Forecast & Analysis. In fact, analysts expect a big jump this year in revenue growth which, since New Jersey just opened up to adult-use sales and AYR Wellness has dispensaries in New Jersey, this checks out. Then, there is another big jump in revenue growth the following year crossing the $1.5B level in about 5 years. But, that is not even close to the one thing that is eye-popping to me about AYRWF stock.
There is one thing about AYR Wellness that if you start to look deeply enough at this stock you see some real big reasons to jump in; especially with the stock so beaten down as it is. With the foundation of some $1.5B in revenue being built into this company, there is one thing about that which needs to be pointed out: AYRWF share count is very, very low at about 70.7M shares outstanding[1]Share count is Pro Forma for 2022.
If we assume that AYRWF stays its course and hits its $1B mark in 4 – 5 years, and the share count remains static, this will mean an approximate $20.00 revenue per share. I cannot think of many cannabis stocks that have such a high revenue per share potential in their future; an exercise worth checking into.
A bigger piece of pie
Share count is very important… just ask management at Halo Collective. It measures the size of the slice of the pie you may be getting. And, we almost always want the biggest slice of pie we can get.
If a company has 100M shares outstanding and they have revenues of $100M, then each share gets $1.00 in revenue per share. Then, if we consider this company is going to grow to $1B, then your share of the pie grows by a factor of 10x.
On the contrary, if another company has 100M shares outstanding, and they have $10M in revenue, your share of the pie is $0.10. If the company were to grow to $100M, you would be getting $1.00 per share in revenue.
What if both of these stocks are currently trading at the same price? Which would you pick?
The bigger piece of pie would be better.
Ratio Comparisons
How do you pick the best stocks? One thing to do is use ratios and compare stocks with each other. The above ratios are an excellent example of how to weed through the financial information and pick one stock over another.
For the record, I am in the process of building up my video courses which will be launching in just a couple of weeks. And, a big focus will be on these kinds of ratios. Using ratios to compare stocks will help you pick the best stocks, one versus another. And, revenue per share is an excellent example of what to look for with a stock.
AYRWF stock & Revenue/Share
Right now, I do not believe that AYR stock is in the best position when you look at revenue/share at this time. But, they are going to be building up a huge amount of velocity when you look at the revenue growth rate and then you look at shares outstanding. That is what stands out for AYRWF stock: The future potential.
This is something that is what will set this stock apart from other stocks: not its current position, but the future velocity using far less dilution in stocks.
In my eyes, AYRWF stock may skyrocket upward in consideration.
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AYR Wellness Financial Data
Here is my take on the latest for AYR Wellness.
AYR Wellness Gross Profits
Revenues at AYR Wellness are going to increase nearly 2x this year via three methods:
- Organic growth at existing dispensaries;
- New growth via new dispensaries (New Jersey & Other locations); and,
- Acquisitions
In the AYRWF stock forecast below, I used the revenue projections from the company MD&A. When a company that is already printing solid cost metrics and margins increases production at such a large level in just one year, the opportunity for that company to see significant gains in economies of scale, improving gross profits & gross margins, means what trickles down to profits will grow significantly.
The fact that AYR Wellness is doing this on a pro forma share count of 70M means that shareholders will be well rewarded versus comparative opportunities.
In the meantime, the ever so slight decline in revenue, QoQ, beats most of the other cannabis stocks that have declined for this quarter. Many cannabis stocks have declined in revenue as the world reemerges from COVID lockdowns, and as inflationary pressures take a toll on consumers and disposable income.
AYR Wellness Operating Profits
Operating efficiencies are a mathematical ratio of cost over revenue. Revenues are going to increase nearly 2x this year. But, I do not see operating costs moving upward at the same rate. This means that operating efficiencies are going to improve quickly during the next year. Measuring costs and keeping track of them is one of the keys to investing in a growth stock.
It is this one type of metric that I like as much as I do for AYR Wellness. The revenue growth, both organically and through acquisitions, as well as the fact that AYR Wellness will not be increasing operating costs noticeably, this means this metric will provide more profits to the bottom line.
And, the fact that AYRWF stock is beaten down as much as it is, despite so much upside potential, shows me how much the broader market is missing out on a tremendous opportunity.
AYR Wellness EBTIDA & Net Profits
At this point, net profits are teetering on the verge of breaking higher, and likely to continue increasing from this point. Yet, and as the stock price shows, the market is not paying attention to this. Also, EBITDA/Revenue is low at this stage. On an adjusted basis, they are printing about 31%.
As AYR Wellness builds up its business, expanding into markets, increasing dispensary counts, and these dispensaries grow into revenue machines, EBITDA will be more consistent. When I put together the AYRWF stock forecast, I used softer data at first and gradually increased the percentages in order to be more aligned with where AYR Wellness is likely to be.
These factors, the fact that there is a lot of upside potential that is yet to be realized, is something that savvy investors will be able to see. But, the masses will miss this opportunity. So, AYRWF stock is trading lower for a number of factors. Those getting in now, those that can see the long term upside potential, will be well rewarded when the masses rush in trying to play catchup.
AYR Wellness Cash On Hand
As AYR Wellness turns up its revenue, profits will grow. These profits will allow AYR Wellness management to build up a cash reserve pile that can be used to grow even more. For now, AYR Wellness is just on the edge of profitability on a consistent basis. As this year unfolds, I imagine that AYR Wellness will build up its profitability levels and with that, cash on hand.
AYR Wellness Total Equity
On the one hand, AYR Wellness will be growing its total equity on an organic basis as new dispensaries become revenue generating machines. The current dispensaries are generating solid revenue per month and, this is a testament to the potential of each dispensary as a valuable asset. Not all cannabis companies give us an indication as to what they potentially produce on an individual basis, but we can glean some information.
Given that, if AYR Wellness can continue to build dispensaries that on a square footage produce high levels of revenue, total equity will climb. These dispensaries will become very. valuable. Then, it is a matter of continually building organic growth on these dispensaries, improving costs, and increasing profitability from each.
There are some acquisitions that are going to shift total equity upward. After that, it is a matter of organic growth powering these assets higher in value while AYR Wellness works off some of the debt incurred to expand. This is what will drive AYRWF stock higher.
AYR Wellness AYRWF Stock Forecast
AYR Wellness AYRWF Stock DCF
| Assumptions | |
|---|---|
| Tax Rate | 25% |
| Discount Rate | 12.500% |
| Perpetural Growth Rate | 25.0% |
| EV/EBITDA Mulltiple | 25.0x |
| Transaction Date | September 1, 2022 |
| Fiscal Year End | 12/31/22 |
| Current Price | $2.796 |
| Shares Outstanding | 69,980,000 |
| Debt | $951,700,000 |
| Cash | $100,800,000 |
| Market Value | |
|---|---|
| Market Cap | $195,664,080 |
| Plus: Debt | $951,700,000 |
| Less: Cash | $100,800,000 |
| Enterprise Value | $1,046,564,080 |
| Equity Value/Share | $2.7960 |
| Discounted Cash Flow | Entry | 2023 | 2024 | 2025 | 2026 | 2027 | Exit | |
|---|---|---|---|---|---|---|---|---|
| Date | September 1, 2022 | Dec 31, 2023 | Dec 31, 2024 | Dec 31, 2025 | Dec 31, 2026 | Dec 31, 2027 | Dec 31, 2027 | |
| Time Periods | 1 | 2 | 3 | 4 | 5 | |||
| Year Fraction | 1.33 | 1.00 | 1.00 | 1.00 | 1.00 | |||
| EBIT | $50,000,000 | $112,500,000 | $200,000,000 | $312,500,000 | $412,500,000 | |||
| Less: Cash Taxes | $12,500,000 | $28,125,000 | $50,000,000 | $78,125,000 | $103,125,000 | |||
| Plus: D&A | $17,500,000 | $26,250,000 | $35,000,000 | $43,750,000 | $52,500,000 | |||
| Less: Capex | $100,000,000 | $150,000,000 | $200,000,000 | $250,000,000 | $300,000,000 | |||
| Less: Changes in NWC | -$75,000,000 | -$112,500,000 | -$150,000,000 | -$187,500,000 | -$225,000,000 | |||
| Unlevered FCF | 1 | $30,000,000 | $73,125,000 | $135,000,000 | $215,625,000 | $286,875,000 | ||
| (Entry)/Exit | -$1,046,564,080 | $4,378,125,000 | ||||||
| Transaction CF | - 0 | $40,000,000 | $73,125,000 | $135,000,000 | $215,625,000 | $286,875,000 | $4,378,125,000 | |
| Transaction CF | -$1,046,564,079 | $40,000,000 | $73,125,000 | $135,000,000 | $215,625,000 | $286,875,000 | $4,378,125,000 |
| Rate of Return | |
|---|---|
| Target Price Upside | 896% |
| Internal Rate of Return (IRR) | 37% |
| Market Value vs Intrinsic Value | |
| Market Value | $2.80 |
| Upside | $25.04 |
| Intrinsic Value | $27.84 |
For the AYRWF stock forecast, I used analyst projections for revenue and EBITDA numbers and then, I gradually increased. The next two years will see a big jump in revenue growth. However, I only added future revenue at a lower pace. I am not certain how AYR Wellness will proceed with revenue growth in years 3, 4, & 5. I went gradual.
And, AYR Wellness is also spending a good amount for CapEx. This means less profits as they build up a bigger foundation. Unfortunately, this also means less profitability as they pay for the debts incurred to open more dispensaries and expand their foundation.
This is the case for many cannabis companies, however. And, it is something that long term investors need to keep in mind that, up front these stocks are not going to be profit powerhouses. Instead, they are going to continually invest into their respective futures.
But, eventually, all of that investment will slow down. And, you will see a big slingshot of profits when that happens.
Is AYR Wellness AYRWF Stock A Good Investment?
I actually owned AYRWF stock via their Liberty acquisition back in November 2020. I picked up Liberty for about $0.11 and then ended up selling everything fairly quickly thereafter at 10x that amount after the news announcement along with other interesting price surges at the time.
But, now I am staring at AYRWF stock once again and thinking I would be silly not to pick this stock up. It may be that given the potential of this company, they build up one of the most dynamic business on only 70M shares outstanding.
If AYRWF can continue to execute, grow its foundation, and keep their share count so low, this will be a powerhouse company. An investor would be buying a stock with a lot of revenue per share. And, once the costs and margins turn up, the profits on those shares will be solid.
