This Pot Company Outperforms Apple and Starbucks on One Metric

Medmen Enterprises Inc Outperforms
iStock.com/OlegMalyshev

This Weed Stock Could Deliver Big Returns

For the most part, marijuana stocks are considered risky investments, and this shouldn’t come as a surprise. In the fourth quarter of 2018, the North American Marijuana Index tumbled 36.8% due to the market sell-off. Even after a strong rally in the new year, the index is yet to make a full recovery.

Still, while pot stocks are known for their volatility, there are marijuana companies with strong fundamentals.

MedMen Enterprises Inc (OTCMKTS:MMNFF, CNSX:MMEN) happens to be one of them.

MedMen is a cannabis retailer that opened its first medical marijuana dispensary in Marina Del Rey, California in 2010 and has grown tremendously since then. Upon the closing of its pending acquisitions, MedMen will be licensed for 77 retail stores and 16 factories in 12 states. (Source: “Corporate Presentation January 2019,” MedMen Enterprises Inc, last accessed February 25, 2019.)

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In particular, the company enjoys early-mover advantage in some of the hottest markets for marijuana, including Los Angeles, Las Vegas, Miami, and New York City.

MedMen went public through a reverse takeover in 2018 and trades on the Canadian Securities Exchange under the ticker “MMEN.” American investors who want to get a piece of the action can purchase MedMen stock over the counter under the symbol “MMNFF.”

What Makes This Marijuana Stock Stand Out

As I mentioned earlier, investments in the cannabis industry are often considered speculative, due to the volatile nature of these securities. But here’s a metric that could give MedMen stock some mainstream appeal: average sales per square foot.

You see, because MedMen is in the retail business, average sales per square foot is one of the key performance metrics for the company. According to the company’s latest investor presentation, that number for MedMen is $6,188.

To put things in perspective, MedMen’s marijuana retail business has a higher average sales per square foot than Starbucks Corporation (NASDAQ:SBUX), Tiffany & Co. (NYSE:TIF), and even Apple Inc. (NASDAQ:AAPL).

MedMen stores $6,188
Apple stores $5,546
Tiffany & Co. stores $2,951
Starbucks stores $1,339

(Source: Ibid.)

The bears can bash the cannabis industry all they want, but they can’t deny the fact that MedMen’s marijuana retail business sold a higher dollar value of products per square foot than the world’s largest coffee chain, a top high-end jewelry brand, and what’s arguably the world’s hottest smartphone maker.

Notably, according to data from the California Bureau of Cannabis Control, MedMen stores are responsible for selling approximately 5.3% of all legal retail cannabis and cannabis products in the Golden State.

Having a solid market share in the most mature cannabis market in the U.S. is certainly good news.

MedMen Enterprises Inc Delivers Quadruple-Digit Growth

What’s even more impressive than MedMen’s sales figures is the company’s ability to grow its business.

In MedMen’s fiscal-year 2018, which ended June 30, 2018, the company generated $39.8 million of revenue, representing a staggering $1,390% increase from the $2.7 million in its fiscal-year 2017. (Source: “MedMen Reports Fourth Quarter and Fiscal Year 2018 Financial Results,” MedMen Enterprises Inc, October 25, 2018.)

Gross profit, before biological asset adjustment, came in at $13.1 million for the year, which also marked a huge improvement from the gross profit of $868,000 earned in the previous fiscal year.

The company’s growth momentum has continued in the current fiscal year.

For the first quarter of fiscal-year 2019, MedMen reported $21.5 million in revenue, representing a 1,094% increase year-over-year. (Source: “MedMen Reports First Quarter Fiscal Year 2019 Financial Results,” MedMen Enterprises Inc, November 29, 2018.)

The company also earned a gross profit, before biological asset adjustment, of $11.7 million for the quarter. That marked a jaw-dropping 1,835% increase from its gross profit of $601,769 in the year-ago period.

MMNFF Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

From its price chart, we see that that MedMen stock has made some recovery recently, but it’s still down quite a bit since last October.

The company’s fundamentals remain solid. If MedMen keeps up the growth momentum in its business, MMNFF stock could turn out to be a big winner in 2019.