No matter how you slice it, many stocks remain very expensive. However, the sell-off of growth stocks in recent months has resulted in more attractive valuations.
Some stocks, though, weren't priced at a premium even before that major pullback, and in its wake, some of those are trading at truly bargain prices. Here are three growth stocks that are unbelievably cheap right now.
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1. Ayr Wellness
Ayr Wellness ( AYRW.F 3.30% ) shares trade at only 7.3 times forward earnings. The stock's trailing 12-month price-to-sales multiple is a super-low 2.05. As such, it is arguably the most attractively valued cannabis stock on the market right now.
But why is this stock so cheap? For one thing, Ayr's share price has plunged more than 60% since last summer. You can blame much of that decline on the overall malaise among cannabis stocks.
However, Ayr has also experienced some challenges that are all its own. The multi-state cannabis operator has endured construction delays, and still awaits key regulatory approvals for its operations in Massachusetts and New Jersey. As a result of these issues, Ayr management has forecast relatively flat sales through the first half of this year.
The good news, though, is that these should be only temporary headwinds. Assuming the company wins the regulatory approvals, it should be on track to achieve an annualized revenue run rate of $800 million in the latter part of 2022.
That would put Ayr's price-to-sales ratio at less than 1.1 based on its current share price. I don't think the stock will become that cheap. If I'm right, this beaten-down cannabis stock is headed higher.
2. Cresco Labs
Cresco Labs' ( CRLBF -0.91% ) price-to-sales multiple of 1.8 makes the stock even cheaper than Ayr on at least one valuation metric. And like Ayr, Cresco is a multi-state cannabis operator.
The two stocks also have something not-so-great in common. Cresco's shares have fallen significantly since last summer and are now nearly 60% below their 52-week high. As was the case with Ayr, the broader sell-off in cannabis stocks weighed on Cresco.
But Cresco's business is booming. The company reported record revenue of $218 million in the fourth quarter of 2021, up 34% year over year. It posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $57 million, a 90% year-over-year jump.
Cresco is poised to grow even faster. The company hopes to close its acquisition of Columbia Care in the fourth quarter of this year. This deal will make Cresco the largest multi-state operator in the U.S. based on pro forma revenue.
3. Jushi Holdings
It's probably no surprise that our third unbelievably cheap growth stock is also a cannabis operator. Jushi Holdings' ( JUSHF 1.31% ) shares trade at 15.8 times expected earnings and 2.8 times trailing-12-month sales, making the stock among the best bargains in the cannabis industry.
We pretty much have the same song but a different verse with Jushi. Like Ayr and Cresco, the stock plunged in sync with the broader sell-off of cannabis stocks. Jushi's share price is now around 60% below the peak it hit early last year.
But Jushi's underlying business isn't struggling. The company's revenue more than doubled year over year in the fourth quarter of 2021 to $65.9 million. Jushi also recorded its first full year of profitability.
Jushi expects its growth to taper off somewhat in 2022. The company faces regulatory delays and supply chain issues, as well as overall economic uncertainty. Still, though, management has forecast that Jushi will finish the year with an annualized revenue run rate of between $375 million and $425 million. This inexpensive stock should still have the potential to deliver impressive returns over the long term.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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April 14, 2022 at 04:55PM
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3 Growth Stocks That Are Unbelievably Cheap Right Now - The Motley Fool
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