Trulieve TCNNF Stock v Curaleaf CURLF Stock: Which Is A Better Buy?

Trulieve TCNNF Stock and Curaleaf CURLF Stock have very similar fundamental data.  They have market capitalizations of $2.75B and $6B, respectively.  Each is expected to generate some $850M and $1.2B in revenues, respectively, over the next year (based upon guidance).  Would an investment in each of these yield the same return, however?  Not necessarily. There are metrics that will determine the final outcome of holding each of these stocks for one year time.  Breaking down some basics will help to show how the outstanding share count will be a factor in this determination.

Trulieve TCNNF Stock & Curaleaf CURLF Stock Comparisons

Here is a look at each stock chart for comparison:

Comparing Two Companies: CURLF Stock v TNCCF Stock

I first got this idea from a tweet by someone I follow on Twitter, MJ Stock Trader.  He threw out a quick question to his followers: which of these would be a better buy?  Or, did it matter at all which to pick up?  It didn’t take me long to think there were only a few variables to look at if you wanted to consider this.

Although there are a lot of similarities between the two behemoths there are some metrics that can be discounted.  Size is irrelevant. Also, the stock price is irrelevant.  What I want to know is performance.  Then, once you see these numbers side-by-side, you get a strong sense of who is a better performer.  But, there’s another kicker metric that may be far more important that I’ll get to in a minute.

Here are some metrics to chew on:

I am using recent metrics from margins. But, the revenue is from guidance.  There have been some recent updates and I am using slightly older data for Trulieve.  Trulieve printed outlying data metrics in recent financials.  I mellowed this out to reflect normal business capabilities.  Still, even after “mellowing”, or adjusting, Trulieve is a far better performer.

Metrics

The little table shows a side-by-side comparison of the two companies.  Revenues are easy enough to compare and they are fairly close to each other in gross amounts.  Gross margins are a different story.  Trulieve is edging out Curaleaf and that is important.

Apple to apple comparisons, if the two companies were selling the exact same amount of cannabis but Trulieve were to consistently have higher gross margins then one of two things could happen.  First, if there were an 8% difference in gross margins then Trulieve could simply lower its prices.  By doing this, Trulieve would start to sell more cannabis on a head-to-head basis.  Interestingly, this would help to drive down costs by increasing volumes.

The other thing that could happen is that Trulieve could simply pocket the higher profits and pass them on to investors.  This would trigger a bigger move in the stock and help with financing costs and raising capital; another competitive advantage.

EBITDA

I used the latest EBITDA data from the previous quarter to show what percentage EBITDA profits were versus revenue; there is an ~6% difference.  So, although Curaleaf is selling more product they are not as profitable.  This is counter to intuition and I wonder if this will flip at some point as Curaleaf strives to improve margins?  If so, this could change the dynamic of this comparison.

Theoretically, a company producing more product will have economies of scale over a competitor producing less.  However, that theory only holds up to a certain point as marginal profits start to diminish from capacity over-utilization; a firm will have to invest CapEx to continue to expand.

Still, the 6% is noteworthy and at the same time, Truileve is continually expanding.  They are also acquiring top-notch companies to expand their footprint in other states.  It may be that revenues need to be adjusted because of acquisitions this year.

Shares Outstanding

Besides performance, shares outstanding is a huge consideration.  This is a matter of how the pie is divided up.  You can break down all of this by looking at the shares outstanding.

According to the relative stock exchanges and MD&As for both of the respective companies, Trulieve has issued some 70M shares via the OTC and 120M shares in Canada for a total of 190M shares outstanding.  Then there is Curaleaf where its MD&A has some 700M shares outstanding.  This is a large difference.

Consider both revenue and EBITDA profits on a per-share basis; this alone may be a deciding factor.  On a per-share basis, revenues would be $4.47 per share for Trulieve versus $1.71 per share for Curaleaf.  This is a real standout to me on a comparison basis.  The pie is simply divided up too many times with Curaleaf comparatively.  With revenues this far apart from each other, and, since EBITDA profits are going to be far higher on a comparison basis, Trulieve stands as a clear stand-out against Curaleaf.

Price

While this is all an interesting exercise there is yet one more bit of information to keep in mind: Price.  At the time of this writing Trulieve, the far better performer, is trading at ~$40.00 per share.  Curaleaf is trading at ~$15.00 per share.  This is also an important consideration.

First, the ratio is 1:2.65; meaning for every one share of Trulieve you would get 2.65 shares of Curaleaf.  Revenue is a little different.  Revenue per share is $4.47 per share for Trulieve, as I mentioned above.  And, with Curaleaf, that same per-share revenue would be $1.71 per share.  If you spent $40.00 to acquire 1 share of Trulieve you are getting $4.47 in revenue.  That same $40.00 spent to acquire Curaleaf gets you the same amount of revenue; which is interesting.  $40.00 would get you 2.65 shares of Curaleaf.  You are earning $1.71 per share in revenue.  But, you are getting more EBITDA on a percentage basis from your Trulieve shares.

Summary: Curleaf CULRF Stock v Trulieve TCNNF Stock

I found this to be an interesting exercise.  With the same dollar amount invested, you are getting the same revenues from each stock.  But, you are losing out on the higher margins which, ultimately will be the deciding factor as to which company will outperform the other.

There is a phrase that I like to drop from time to time: All else equal.  If revenues increased at the same pace with both companies, all else equal, Trulieve would be the more optimal investment simply because of the margin differential.

For me, I would be more inclined to invest in Trulieve TCNNF Stock over Curaleaf CURLF Stock.

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