Motley Fool calls Green Thumb the safest pot stock now, citing strong fundamentals

Green Thumb Industries stock is the “safest bet on the board” in the cannabis sector, according to Motley Fool contributor Jeff Siegel. Unlike its rivals, the mid-cap cannabis products manufacturer and retailer is profitable, while its healthy balance sheet provides valuable financial flexibility, he explained.

Green Thumb can be considered the “safest bet on the board” in the cannabis industry, Siegel argues. The company has earned a reputation as one of the cannabis sector’s best-run businesses, a view supported by its financial results. In the first quarter, Green Thumb’s revenue rose 7.4% year over year to $300.2 million, while net income increased more than 85% to $15.4 million.

Siegel also highlighted the company’s strong financial position. As of March 31, it had around $344.5 million in cash and cash equivalents, versus total debt of $289.9 million. This allowed Green Thumb to buy back around 6 million shares for approximately $33.3 million in the first quarter. After the end of the quarter, it repurchased another 7.4 million shares.

This suggests that the management believes the stock is undervalued and that the company generates enough cash to reward shareholders, writes Siegel. He also pointed to the management’s selective approach to expanding its RISE Dispensaries retail chain instead of “chasing growth at any cost.” RISE currently has more than 110 locations across the U.S.

In Siegel's view, all this distinguishes Green Thumb from its rivals: dozens of cannabis companies expanded too quickly, took on excessive debt, or repeatedly diluted shareholders to stay afloat.

Green Thumb shares trade over the counter and have gained 20% over the last 12 months. Seven Wall Street analysts cover the stock, and all rate it a “buy.” The average target price is $15.40 per share, implying around 117% upside from the Friday closing price. The stock gained just under 1.5% that day to $7.10 apiece.

In December, U.S. President Trump signed an executive order calling for marijuana to be moved from the tightly restricted Schedule I category, which includes drugs such as heroin and LSD, to Schedule III, which includes ketamine, an anesthetic.

In April of this year, the U.S. Justice Department "rescheduled" cannabis and all cannabis-based medicines. However, the move did not automatically legalize cannabis at the federal level, as under U.S. law individual states may impose their own restrictions on its sale.