After its trading debut on the Nasdaq last week, British Columbia-based Tilray has a market cap in excess of $3 billion – more than 140 times its reported 2017 revenue of $20.5 million.
Across the board, the market caps ring in at multiples of nearly 90 to more than 120 times each of the firms’ reported revenues.
“It is not unusual for an early stage, hypergrowth industry to receive high valuations,” said Scott Greiper, president at Viridian Capital Advisors.
Looking back at tech and other emerging industries, Greiper said it’s common for early stage markets to be valued on an “enterprise value to revenue multiple” – a metric used for high-growth businesses that don’t have a long history of positive earnings.
“This stage of market growth is all about market share, early revenue traction and an overall land grab,” he said.
But even given those considerations: “In the Canadian marketplace, valuations certainly seem excessive.”
Hooooooooowheeeee those valuations seem excessive. Tilray has a market cap over 140x its revenue in 2017. Those share prices are going to have to fall at some point.
If you have any friends who want to invest in the industry, tell them that right now is possibly the worst time to invest (stock prices will be insane). Wait til there’s a crash before investing. Remember, the rule for investing is always buy low and sell high. When companies are overvalued this excessively, we’re on high tide. Wait til low tide comes in.