11-07-2022, 08:56 AM
TILRAY BRANDS - TLRY Stock Evaluation
<!-- SC_OFF --><div class="md"><p>Sup Redditor, how ya doing? There are winds of legalization around the corner, some say it is bullshit some say it will happen, who knows?</p> <p>I am thinking in going in with x5 leverage on it with half of my wage, but still unsure, this stock fate is linked with US legalization. That is why i made a quick evaluation of the stock and its fundamentals, so here i am sharing hard numbers with you.</p> <p>Enjoy!
</p> <p><strong>TL
R</strong></p> <ul> <li>Statistical risk of 7.72%</li> <li>Scenario 1: No growth, No Legalization: -$0.89</li> <li>Scenario 2: Legalization, Low but Stable Growth, Low effciency: $1.89</li> <li>Scenario 3: Legalization, Growthing growth rate, Increase efficiency: $4.12</li> </ul> <h1>Table of Contents</h1> <ol> <li><strong>Introduction</strong></li> <li><strong>Methodology</strong></li> <li><strong>Historical Statistics</strong></li> <li><strong>SWOT Analysis</strong></li> <li><strong>Ratios</strong></li> <li><strong>Analysts price target</strong></li> <li><strong>Final Considerations</strong></li> </ol> <h1>Introduction</h1> <h2>Background</h2> <p>Tilray Brands, Inc. engages in the <strong>research, cultivation, production, marketing, and distribution of medical cannabis</strong> products in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally.</p> <p>The company operates through four segments:</p> <ul> <li>Cannabis Business,</li> <li>Distribution Business,</li> <li>Beverage Alcohol Business,</li> <li>Wellness Business.</li> </ul> <p>It offers medical and adult-use cannabis products, including GMP-certified flowers, oils, vapes, edibles, and topicals; purchases and resells pharmaceutical and wellness products; and produces, markets, sells, and distributes beverage alcohol products, and hemp-based food and other wellness products. The company offers its products under the <strong>Tilray, Aphria, Broken Coast, Symbios, B!NGO, The Batch, P'tite Pof, Dubon, Good Supply, Solei, Chowie Wowie, Canaca, RIFF, SweetWater, Breckenridge Distillery, Alpine Beer Company, and Green Flash brands</strong></p> <p>Tilray Brands, Inc. is headquartered in <strong>Leamington, Canada</strong>.</p> <h2>Purpose</h2> <p>The purpose of this thesis is to analyze the development of Tilray during 2019 to 2022 and forecast its activity for the next five years. Not only are the financial statements taken into consideration but also macroeconomics factors and legal factors.</p> <p>All is made to answer the following questions:</p> <ul> <li>What is its future potentia?</li> <li>What are the risks?</li> <li>Is the company a Buy or a Sell?</li> </ul> <h2>Hypothesis & Assumptions</h2> <ul> <li>TRLY is not a dying company</li> <li>TRLY will benefit grately from Marijuana Legalization in the USA</li> <li>TRLY will cut and cointain costs related to sales</li> <li>TRLY will maintain stable its Operating Costs</li> <li>TRLY is targeting positive Free Cash Flow for the end of 2023</li> <li>Competitors is not taken in count in this analysis</li> <li>Model uses 3 different growth rate, further explanation in "Methodology"</li> </ul> <p>________________________________________________________</p> <h1>Methodology</h1> <p>We will compare three growth model:</p> <ol> <li>-5.70% Earnings' based growth model, with not legalization projected to 2026, perpetual growth</li> <li>Arbitrary growth rate of 5% counting in legalization in 2023, projected until 2026, perpetual growth</li> <li>Arbitrary growth counting in legalization in 2023, projected until 2026, gradual growth of 5%, 7%, 10%, 15%, with averge annual perpetual growth of 12%</li> </ol> <h1>Secondary Data</h1> <p>Secondary data is the information that doesn’t require a direct collection or studies, this information is publicly available online for the public to be consulted. Meanwhile, primary data are information that has to be collected by direct means such as interviews, measurements or polls. In this paper, only secondary data and data derived from it are used. Following the main data related to the company that are mainly used for the evaluation models:</p> <table><thead> <tr> <th align="left">Data</th> <th align="left">Number</th> <th align="left">Source</th> </tr> </thead><tbody> <tr> <td align="left">Levered Beta</td> <td align="left">1.62</td> <td align="left">TradingView</td> </tr> <tr> <td align="left">Unlevered Beta</td> <td align="left">1.28</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Market Expected Return</td> <td align="left">9.40%</td> <td align="left">Motley Fools, 50y average</td> </tr> <tr> <td align="left">US Interest Rate</td> <td align="left">4.50%</td> <td align="left">Trading economics + 50bps</td> </tr> <tr> <td align="left">Risk Free Rate</td> <td align="left">4.15%</td> <td align="left">Yahoo Finance, 10y treasury bonds</td> </tr> <tr> <td align="left">Risk Premium</td> <td align="left">5.25%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Effective Corp Tax</td> <td align="left">1.48%</td> <td align="left">1.48%</td> </tr> <tr> <td align="left">CAPM</td> <td align="left">10.88%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">WACC</td> <td align="left">9.62%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17%</td> <td align="left">Moody's Seasoned AAA Corporate Bond Yield</td> </tr> <tr> <td align="left">EPS</td> <td align="left">0.41</td> <td align="left">Yahoo Finance</td> </tr> <tr> <td align="left">Average US GDP Growth</td> <td align="left">3.18%</td> <td align="left">TradingEconomics 1947 - 2022</td> </tr> <tr> <td align="left">Outstanding shares</td> <td align="left">611,402,300</td> <td align="left">Excel Stock Data 31/10/2022</td> </tr> <tr> <td align="left">Scenario 1 - Earning Based Growth Rate</td> <td align="left">-5.70%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Scenario 2 - Legalization + perpetual growth</td> <td align="left">5%</td> <td align="left">Estimate Conservative</td> </tr> <tr> <td align="left">Scenario 3 - Legalization + ascending growth</td> <td align="left">5%, 10%, 15%, 20%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">ROA</td> <td align="left">-10.90%</td> <td align="left">Computing</td> </tr> </tbody></table> <p>​</p> <h1>Macro Economic Data</h1> <table><thead> <tr> <th align="left">Data</th> <th align="left">Number</th> </tr> </thead><tbody> <tr> <td align="left">Market Expected Return</td> <td align="left">9.40%</td> </tr> <tr> <td align="left">Risk Free Rate</td> <td align="left">4.15%</td> </tr> <tr> <td align="left">Risk Premium</td> <td align="left">5.25%</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17%</td> </tr> <tr> <td align="left">Average US GDP Growth</td> <td align="left">3.18%</td> </tr> <tr> <td align="left">Current Market P/E</td> <td align="left">20.29</td> </tr> </tbody></table> <h1>Evaluation Methods</h1> <p>In this post, <strong>three evaluation methods are used</strong> to evaluate the company's final fair value. Each method gives us different current fair values for a single share of the company. The final price tag is determined by the average price between all the methods used.</p> <h2>Growth Rate</h2> <p><strong>The Growth Rate of -5.70%</strong> is calculated taking in count the previous year earnings and its historical ROE calculated by the average ROE from 2019 to 2022 of -5.70%.</p> <h2>Free Cash Flow Evaluation Model</h2> <p>This simple model takes in mind the company 2022 reported Free Cash Flow and its WACC based discounted rate of 9.62% and its Growth Rate of [<em>scenatio 1; scenario 2; scenario 3</em>]% to determine a fair value of:</p> <ol> <li>$0.10</li> <li>$0.37</li> <li>$0.77</li> </ol> <p>Note: the Scenario 2 and 3 is computed by using the assumption that the company will have positive free cash flow by end of 2023 as the managment planned, we assume a FCF of 10 milion</p> <h2>Adjusted Graham Fair Value Formula</h2> <p>This model is used in the Value Investing communities to price tag a company based on its intrinsic value. This formula is created by Benjamin Graham, a value investor and professor at Columbia University who is considered the father of Value Investing.</p> <p><strong>Intrinsic value = EPS × [(8.5 + (2 × Expected annual growth rate, g)]</strong></p> <p>Which 8.5 is the P/E base of a no-growth company, and the expected growth rate is the company perpetual growth rate for the future.</p> <p>In 1974, in the revised edition of <strong>The Intelligent Investor</strong>, Graham revised the formula to</p> <p><strong>Intrinsic value = [EPS × (8.5 + 2*g) × 4.4]/Y</strong></p> <p>In this formula, 4.4 is the then prevailing (1962) rate on high-grade corporate bonds listed on the New York Stock Exchange. Y is the current yield on AAA-rated corporate bonds.</p> <p>Graham thought that as the investor had the choice between putting money in common stocks or bonds, it was appropriate to take into account the rate of interest paid on a high-grade bond of 4.4 per cent in determining the intrinsic value of a stock.</p> <p>In this thesis we use an adjusted formula</p> <p><strong>Intrinsic value = [EPS × (7 + 1*g) × 4.4]/Y</strong></p> <p>The P/E of 7 is used because even if a company has zero growth prospects, but it is able to maintain cash flows and distribute dividends, its P/E is generally higher than 8.5.</p> <p>The used growth rate is the one calculated in the three scenarios.</p> <p>The '2' multiplier is too aggressive. Graham never experienced companies with growth rates of 15-25 per cent, which is common today. Instead of '2', here it is used 1 instead.</p> <p>The interest rate of 4.4 is left as the original, some modern adjustment put this value at 8.5, which is the five-year fixed deposit rate. This value is the substitute of the risk-free rate, which sometimes can be used instead of 4.4.</p> <p>Data used for the calculation:</p> <table><thead> <tr> <th align="left">EPS</th> <th align="left">4.66</th> </tr> </thead><tbody> <tr> <td align="left">Growth Rate</td> <td align="left">[Scenario 1; Scenario 2; Scenario 3]</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17</td> </tr> </tbody></table> <p>The Adjusted Graham Intrinsic Value Formula gives us a price tag of</p> <ol> <li>$0.45</li> <li>$4.19</li> <li>$6.63</li> </ol> <p>​</p> <h2>Discounted Unlevered Free Cash Flow Model</h2> <p>A modified version of the traditional Discounted Cash Flow. This model instead of using the free cash flow, uses the unlevered one.</p> <p>Unlevered free cash flow (UFCF, also known as Free cash Flow to the Firm) is <strong>the amount of available cash a firm has before accounting for its financial obligations</strong>. Free cash flow (FCF), on the other hand, is the money a company has left over after paying its operating expenses and capital expenditures. It is used to remove the impact of capital structure on a firm's value and to make companies more comparable</p> <p>In simple words. It is the cash flow of a company based on the belief that the company owes no debt, therefore has no interest payments to make.</p> <p>In this model, it is taken in mind the following data:</p> <table><thead> <tr> <th align="left">WACC based discount rate</th> <th align="left">6.45%</th> </tr> </thead><tbody> <tr> <td align="left">Growth rate</td> <td align="left">[Scenario 1; Scenario 2; Scenario 3]</td> </tr> <tr> <td align="left">Average US GDP growth rate</td> <td align="left">3.18%</td> </tr> <tr> <td align="left">rage Shares outstanding</td> <td align="left">611,402,300</td> </tr> </tbody></table> <p>This model gives us a price tag of:</p> <ol> <li>-$3.22</li> <li>$1.12</li> <li>$4.97</li> </ol> <h2>Final Fair Value</h2> <p>The Final price tag is determined as per following:</p> <table><thead> <tr> <th align="left"></th> <th align="left">Fair Value</th> </tr> </thead><tbody> <tr> <td align="left">Scenario 1</td> <td align="left">-0.89</td> </tr> <tr> <td align="left">Scenario 2</td> <td align="left">$1.89</td> </tr> <tr> <td align="left">Scenario 3</td> <td align="left">$4.12</td> </tr> <tr> <td align="left"><strong>Average of the three scenarios</strong></td> <td align="left"><strong>$1.70</strong></td> </tr> </tbody></table> <h1>Historical Statistics</h1> <p>Statistics calculated on historical price movement in terms of percentile movement from 2018 to 2022</p> <table><thead> <tr> <th align="left">Minimum Expected Return</th> <th align="left">0.12%</th> </tr> </thead><tbody> <tr> <td align="left">Variance</td> <td align="left">0.60%</td> </tr> <tr> <td align="left">Standard Deviation</td> <td align="left">7.72</td> </tr> <tr> <td align="left">Max</td> <td align="left">56.75%</td> </tr> <tr> <td align="left">Median</td> <td align="left">-0.60%</td> </tr> <tr> <td align="left">Min</td> <td align="left">-49.68%</td> </tr> <tr> <td align="left">Average</td> <td align="left">0.10%</td> </tr> <tr> <td align="left">Kurtosis</td> <td align="left">10.93</td> </tr> <tr> <td align="left">Skewness</td> <td align="left">1.40</td> </tr> <tr> <td align="left">Standard Error</td> <td align="left">0.23%</td> </tr> <tr> <td align="left">Count</td> <td align="left">1084</td> </tr> </tbody></table> <p><strong>Main Population Density</strong></p> <table><thead> <tr> <th align="left">Bin</th> <th align="left">Frequency</th> <th align="left">Density</th> </tr> </thead><tbody> <tr> <td align="left"><strong>-6%</strong></td> <td align="left">63</td> <td align="left">5.93%</td> </tr> <tr> <td align="left"><strong>-4%</strong></td> <td align="left">117</td> <td align="left">11.01%</td> </tr> <tr> <td align="left"><strong>-2%</strong></td> <td align="left">180</td> <td align="left">16.93%</td> </tr> <tr> <td align="left"><strong>0%</strong></td> <td align="left">171</td> <td align="left">16.09%</td> </tr> <tr> <td align="left"><strong>2%</strong></td> <td align="left">167</td> <td align="left">15.71%</td> </tr> <tr> <td align="left"><strong>4%</strong></td> <td align="left">97</td> <td align="left">9.13%</td> </tr> <tr> <td align="left"><strong>6%</strong></td> <td align="left">72</td> <td align="left">6.77%</td> </tr> <tr> <td align="left"><strong>8%</strong></td> <td align="left">36</td> <td align="left">3.39%</td> </tr> </tbody></table> <p>​</p> <h1>SWOT Analysis</h1> <h2>Strengths</h2> <ul> <li><strong>Distribution and Reach</strong>: Tilray Inc has a large number of outlets in almost every state, supported by a strong distribution network that makes sure that its products are available easily to a large number of customers in a timely manner</li> <li><strong>Dealer Community</strong>: Tilray Inc has a strong relationship with its dealers that not only provide them with supplies but also focus on promoting the company's products and training.</li> <li><strong>Return on Capital Expenditure</strong>: Tilray Inc has been successfully able to generate positive returns on the capital expenditure it has incurred on various projects in the past.</li> <li><strong>Automation</strong>: of various stages of production has allowed the more efficient use of resources and reducing costs. It also allows for consistency in quality of its products and provides the ability to scale up and scale down production as per the demand in the market.</li> <li><strong>Skilled Labor force</strong>: Tilray Inc has invested extensively in the training of its employees that has resulted in it employing a large number of skilled and motivated employees.</li> <li><strong>Tilray Inc has a diversified workforce</strong>, with people of many geographical, racial, cultural and educational backgrounds that help the company by bringing in diverse ideas and methodologies of doing things.</li> <li><strong>Tilray Inc has qualified and accredited professionals</strong> working under in its team.</li> <li><strong>Entering new markets</strong>: Tilray Inc’s innovative teams have allowed it to come up with new products and enter new markets. It has been successful in past, in most of the initiatives it has taken in new markets.</li> <li><strong>Website</strong>: Tilray Inc has a well-functioning and interactive website that draws a large number of internet traffic and sales.</li> <li><strong>Product Portfolio</strong>: Tilray Inc has a large product portfolio where it provides products in a large range of categories. It has a number of unique product offerings that are not provided by competitors.</li> <li><strong>The geography and location of Tilray Inc</strong> provide it with a cost advantage in serving its customers, when compared to that with the competition.</li> <li><strong>Tilray Inc has a well-established IT system</strong> that ensures efficiency in its internal and external operations.</li> <li><strong>Tilray Inc owns a number of intellectual property rights</strong> that include trademarks and patents. These allow it exclusivity over its products and competitors cannot copy or reverse engineer them.</li> <li><strong>Tilray Inc is a brand that has been in the market for years</strong>, and people are aware of it. This makes its brand awareness high.</li> <li><strong>Its products have maintained quality over the years</strong> and are still valued by customers, who find it as good value for the amount of money that they pay.</li> <li><strong>Partnership</strong>s: Strategic partnerships are established by Tilray Inc with its suppliers, dealers, retailers and other stakeholders. This allows it to leverage them if need be in the future.</li> </ul> <h2>Weaknesses</h2> <ul> <li><strong>Research and Development</strong>: Even though Tilray Inc is spending more than the average research and development expenditure within the industry, it is spending way less than a few players within the industry that have had a significant advantage as a result of their innovative products.</li> <li><strong>High Day Sales Inventory</strong>: The time it takes for products to be purchased and sold are higher than the industry average, meaning that Tilray Inc builds up on inventory adding unnecessary costs to the business.</li> <li><strong>Rented Property</strong>: A significant proportion of the property that Tilray Inc owns is rented rather than purchased. It has to pay large amounts of rent on these adding to its costs.</li> <li><strong>Low current ratio</strong>: The current ratio that shows the company’s ability to meet its short term financial obligations, is lower than the industry average. This could mean that the company could have liquidity problems in the future.</li> <li><strong>The company has low levels of current assets compared to current liabilities</strong>, and this can create liquidity problems for it in operations.</li> <li><strong>Cash flow problems</strong>: There is a lack of proper financial planning at Tilray Inc regarding cash flows, leading to certain circumstances where there isn’t enough cash flow as required leading to unnecessary unplanned borrowing.</li> <li><strong>Integration</strong>: Tilray Inc's current structure and culture have resulted in the failure of various mergers aimed at vertical integration.</li> <li><strong>Market Research</strong>: Tilray Inc has not conducted market research within the market that is serves since the past 2 years. As a result, it is making decisions based on years old data, while customer needs may have evolved over time.</li> <li><strong>High employee turnover rates</strong>: Tilray Inc has a higher employee turnover rate compared to competitors. This means that it has more people leaving the job, and as a result, it is spending more on training and development as employees keep leaving and joining.</li> <li><strong>Quality Control</strong>: Tilray Inc has a lower budget for its quality control department than competitors. This leads to lack of consistency and the possibility of damage to quality across its various outlets.</li> <li><strong>Lack of legal experience</strong> and legal department employees are not highly qualified.</li> <li><strong>A few products have a high market share</strong>, while most of the products have a low market share. This reliance on a few products makes Tilray Inc vulnerable to external threats if these few products suffer for any reason.</li> <li><strong>The workload is a high per worker</strong> as there are fewer workers than the actual work required. This puts workers under psychological stress and is likely to be less productive.</li> <li><strong>Worker morale is low due to company culture</strong> and politics that have grown in recent years.</li> <li><strong>Competition and qualified employees have been leaving</strong> the organisation in recent years, which could mean a shortage of good talent for the company in the upcoming years.</li> <li><strong>The decision making is highly centralized</strong>, and decisions by teams need to be approved by certain officials. This reduces efficiency in operations by making them more time consuming. It also leads to reduced innovation.</li> <li><strong>The performance appraisal is not in a systematic manner</strong>. People are often not appraised for their performance. This leads to lower work morale and lack of promotion opportunities for employees.</li> </ul> <h2>Opportunities</h2> <ul> <li><strong>Internet</strong>: there has been an increase in the number of internet users all over the world. This means that there is an opportunity for Tilray Inc to expand their presence online; by using the internet to interact with its customers.</li> <li><strong>E-commerce</strong>: There has been a new trend and a growth in sales of the e-commerce industry. This means that a lot of people are now making purchases online. Tilray Inc can earn revenue by opening online stores and making sales through these.</li> <li><strong>Social Media</strong>: there has been an increase in the number of social media users worldwide. The three social media platforms; Facebook, Twitter and Instagram, have shown the greatest number of increase in monthly active users. Tilray Inc can use social media to promote its products, interact with customers and collect feedback from them.</li> <li><strong>Technological developments</strong>: technology comes with numerous benefits among many departments. Operations can be automated to reduce costs. Technology enables better data to be collected on customers and improves on marketing efforts.</li> <li><strong>Population</strong>: the population has been growing and is expected to grow at a positive rate for the upcoming years. This is beneficial for Tilray Inc as there will be an increase in the number of potential customers that it can target.</li> <li><strong>Green government drive</strong>: this provides an opportunity for Tilray Inc for the sale of Tilray Inc's products to federal and state government contractors.</li> <li><strong>Transport Industry</strong>: the transport industry has been flourishing in the past few years, and shows growth potential in the future. This has reduced the costs of transportation, which is beneficial for Tilray Inc as it will lower its overall costs.</li> <li><strong>Tax policy:</strong> the governments’ reduction in tax rate is beneficial for Tilray Inc as a lower amount would be expensed out as a tax.</li> <li><strong>Tourism:</strong> growth in tourism is beneficial for Tilray Inc as it will provide new potential customers that it can target in order to gain market share.</li> <li><strong>Skilled workers:</strong> increase in education and training by numerous institutes has increased the amount of skilled labor available within the country. This means that if Tilray Inc is able to hire skilled labor, it would have to spend less on training and development, therefore, saving costs.</li> <li><strong>A number of new niche markets have opened up that are growing</strong>. Tilray Inc can sell products in these markets and take advantage.</li> <li><strong>Globalisation</strong>: Increased globalisation does not restrict Tilray Inc to its own country. It can extend its operations to other countries, entering into these markets and making use of the opportunities that lie in these markets.</li> <li><strong>Consumers within the industry are becoming more conscious of health, and this is a segment that is growing</strong>. Tilray Inc can take advantage by manufacturing products that are beneficial to customer's health.</li> <li><strong>Trade barriers have been reduced on the import of goods</strong>. This will reduce the costs incurred on inputs for production.</li> <li><strong>Regulations have loosened in recent years</strong> making it easier for businesses to carry out their operations.</li> </ul> <h2>Treats</h2> <ul> <li><strong>Technological developments by competitors</strong>; New technological developments by a few competitors within the industry pose a threat to Tilray Inc as customer attracted to this new technology can be lost to competitors, decreasing Tilray Inc’s overall market share.</li> <li><strong>Suppliers:</strong> The bargaining power of suppliers has increased over the years with the decrease in the number of suppliers. This means that the costs of inputs could increase for Tilray Inc.</li> <li><strong>New entrants:</strong> there have been numerous players that have entered the market and are gaining market share by gaining existing companies’ market share. This is a threat to Tilray Inc as it can lose its customers to these new entrants.</li> <li><strong>Increasing competition</strong>: there has been an increase in competition within the industry putting downward pressure on prices. This could lead to reduced revenue for Tilray Inc if it adjusts to the price changes, or loss of market share if it doesn’t.</li> <li><strong>Exchange Rate:</strong> the exchange rate keeps fluctuating and this affects a company like Tilray Inc that has sales internationally, while its suppliers are local.</li> <li><strong>Political uncertainties</strong> in the country prove to be a barrier in business, hindering performance at times and making the business incur unnecessary costs.</li> <li><strong>The fluctuating interest rates</strong> in the country do not provide a stable financial and economic environment.</li> <li><strong>Consumer tastes are changing</strong>, and this puts pressure on companies to constantly change their products to meet the needs of these customers.</li> <li><strong>Substitute products available are also increasing</strong>, which is threat collectively for the whole industry as consumption of current products decrease.</li> <li><strong>The rise in prices of fuel</strong> has increased in the input costs for Tilray Inc. These costs have also increased as other industries that provide inputs for this company also have suffered from increasing fuel prices, thereby charging more.</li> <li><strong>Increased promotions by competitors</strong> have been a threat for Tilray Inc. On most media, there is more clutter than ever, and customers are bombarded with multiple messages. This reduces the effectiveness of promotional messages by Tilray Inc.</li> <li><strong>Constant technological developments require the workforce to be trained</strong> accordingly as the inability to keep up with these changes can lead to loss of business for Tilray Inc.</li> </ul> <h1>Ratios</h1> <p><strong>Management Effectiveness</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">ROC</td> <td align="left">-3%</td> <td align="left">-1%</td> <td align="left">0%</td> </tr> <tr> <td align="left">ROE</td> <td align="left">-9.72%</td> <td align="left">-7.54%</td> <td align="left">-4.60%</td> </tr> <tr> <td align="left">ROIC</td> <td align="left">-4.69%</td> <td align="left">-1.92%</td> <td align="left">0.12%</td> </tr> </tbody></table> <p>​</p> <p><strong>Financial</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">Working Capital</td> <td align="left">2.87</td> <td align="left">2.20</td> <td align="left">5.30</td> </tr> <tr> <td align="left">Acid Test</td> <td align="left">1.82</td> <td align="left">1.46</td> <td align="left">3.40</td> </tr> <tr> <td align="left">Debt Ratio</td> <td align="left">11.45%</td> <td align="left">15.58%</td> <td align="left">16.67%</td> </tr> </tbody></table> <p><strong>Value</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">Price to Book Ratio</td> <td align="left">0.52</td> <td align="left">0.52</td> <td align="left">1.76</td> </tr> <tr> <td align="left">Income Quality</td> <td align="left">-0.41</td> <td align="left">-0.13</td> <td align="left">-1.58</td> </tr> </tbody></table> <p>​</p> <h2>Analysts Price Target</h2> <table><thead> <tr> <th align="left"><strong>Scenario</strong></th> <th align="left">Price Target</th> </tr> </thead><tbody> <tr> <td align="left"><strong>High</strong></td> <td align="left">$12</td> </tr> <tr> <td align="left"><strong>Average</strong></td> <td align="left">$4.86</td> </tr> <tr> <td align="left"><strong>Low</strong></td> <td align="left">$2</td> </tr> </tbody></table> <p><strong>OP’s Price Target</strong></p> <table><thead> <tr> <th align="left">Scenario 1 (Bad)</th> <th align="left">-0.89</th> </tr> </thead><tbody> <tr> <td align="left">Scenario 2 (Normal)</td> <td align="left">$1.89</td> </tr> <tr> <td align="left">Scenario 3 (Positive)</td> <td align="left">$4.12</td> </tr> </tbody></table> <p>​</p> <h1>Final Considerations</h1> <p><strong>What is its future potential?</strong></p> <p>Without Legalization, the company is destined to fail. It is burning its cash at a 2.09 rate, leaving it only 25 months of life expectancy (take in mind that this is an assumption cause obviously in those 25 months the company will have sales and other operations bringing in cash, the life expectancy is calculated on the assumption the company will not have further sales or other income of cash, so take this data as indicative). If we assume a recover of macro data, consumption shall growth in other segments in which the company operates, cause marijuana is not its biggest nor main revenue stream. The company is well diversified of even without legalisation we shall expect to see it aroun in the next 5 years.</p> <p>With Legalizaion, it is moon time baby. Its fundamentals, at the most conservative assumptions, prices it around 4$ but we all know that hype will push it further that price level bring it to be overvalued. Retailers and institution will surely try to cash in the hype so beware of speculative plays.</p> <p>With the legalization scenarios, we can expect two outcomes:</p> <ol> <li>The Management do not manage to contain costs and improve efficiency, making it growth slow</li> <li>The Management manages to cut cost and boost efficiency, making Tilray grow</li> </ol> <p>There is potential, but risk is very high</p> <p><strong>What are the risks?</strong></p> <p>Observing statistical data about Tilray's price movements, we can except a 7.72% risk rate. The Stock's return distribution is concentrated around negative numbers. If you want to invest for long time expect a miminum retuern rate of 0.12% and a 44% chancge of getting a daily price movement between -4% and 0%</p> <p><strong>Is the company a Buy or a Sell?</strong></p> <p>This is hard. It all depend on legalization in the USA, and if it happens, it depends on when it happens. If legalization comes in 5 years, welp, this company is going tits up, but if it come next week, well, you know the drill.</p> <p>Personally this stock is a Gamble, cause its fate is determined heavily by politics.</p> <p>Are you a Gamblerer?</p> <p>​</p> <p>​</p> <p>​</p> <p><strong>What are you thoughts? Is Tilray a Buy or a Sell? Let us all know!</strong></p> <p><strong><em>This is not a financial advice.</em></strong></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/YungChaky"> /u/YungChaky </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/yo3i6d/tilray_brands_tlry_stock_evaluation/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/yo3i6d/tilray_brands_tlry_stock_evaluation/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p>Sup Redditor, how ya doing? There are winds of legalization around the corner, some say it is bullshit some say it will happen, who knows?</p> <p>I am thinking in going in with x5 leverage on it with half of my wage, but still unsure, this stock fate is linked with US legalization. That is why i made a quick evaluation of the stock and its fundamentals, so here i am sharing hard numbers with you.</p> <p>Enjoy!
</p> <p><strong>TLR</strong></p> <ul> <li>Statistical risk of 7.72%</li> <li>Scenario 1: No growth, No Legalization: -$0.89</li> <li>Scenario 2: Legalization, Low but Stable Growth, Low effciency: $1.89</li> <li>Scenario 3: Legalization, Growthing growth rate, Increase efficiency: $4.12</li> </ul> <h1>Table of Contents</h1> <ol> <li><strong>Introduction</strong></li> <li><strong>Methodology</strong></li> <li><strong>Historical Statistics</strong></li> <li><strong>SWOT Analysis</strong></li> <li><strong>Ratios</strong></li> <li><strong>Analysts price target</strong></li> <li><strong>Final Considerations</strong></li> </ol> <h1>Introduction</h1> <h2>Background</h2> <p>Tilray Brands, Inc. engages in the <strong>research, cultivation, production, marketing, and distribution of medical cannabis</strong> products in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally.</p> <p>The company operates through four segments:</p> <ul> <li>Cannabis Business,</li> <li>Distribution Business,</li> <li>Beverage Alcohol Business,</li> <li>Wellness Business.</li> </ul> <p>It offers medical and adult-use cannabis products, including GMP-certified flowers, oils, vapes, edibles, and topicals; purchases and resells pharmaceutical and wellness products; and produces, markets, sells, and distributes beverage alcohol products, and hemp-based food and other wellness products. The company offers its products under the <strong>Tilray, Aphria, Broken Coast, Symbios, B!NGO, The Batch, P'tite Pof, Dubon, Good Supply, Solei, Chowie Wowie, Canaca, RIFF, SweetWater, Breckenridge Distillery, Alpine Beer Company, and Green Flash brands</strong></p> <p>Tilray Brands, Inc. is headquartered in <strong>Leamington, Canada</strong>.</p> <h2>Purpose</h2> <p>The purpose of this thesis is to analyze the development of Tilray during 2019 to 2022 and forecast its activity for the next five years. Not only are the financial statements taken into consideration but also macroeconomics factors and legal factors.</p> <p>All is made to answer the following questions:</p> <ul> <li>What is its future potentia?</li> <li>What are the risks?</li> <li>Is the company a Buy or a Sell?</li> </ul> <h2>Hypothesis & Assumptions</h2> <ul> <li>TRLY is not a dying company</li> <li>TRLY will benefit grately from Marijuana Legalization in the USA</li> <li>TRLY will cut and cointain costs related to sales</li> <li>TRLY will maintain stable its Operating Costs</li> <li>TRLY is targeting positive Free Cash Flow for the end of 2023</li> <li>Competitors is not taken in count in this analysis</li> <li>Model uses 3 different growth rate, further explanation in "Methodology"</li> </ul> <p>________________________________________________________</p> <h1>Methodology</h1> <p>We will compare three growth model:</p> <ol> <li>-5.70% Earnings' based growth model, with not legalization projected to 2026, perpetual growth</li> <li>Arbitrary growth rate of 5% counting in legalization in 2023, projected until 2026, perpetual growth</li> <li>Arbitrary growth counting in legalization in 2023, projected until 2026, gradual growth of 5%, 7%, 10%, 15%, with averge annual perpetual growth of 12%</li> </ol> <h1>Secondary Data</h1> <p>Secondary data is the information that doesn’t require a direct collection or studies, this information is publicly available online for the public to be consulted. Meanwhile, primary data are information that has to be collected by direct means such as interviews, measurements or polls. In this paper, only secondary data and data derived from it are used. Following the main data related to the company that are mainly used for the evaluation models:</p> <table><thead> <tr> <th align="left">Data</th> <th align="left">Number</th> <th align="left">Source</th> </tr> </thead><tbody> <tr> <td align="left">Levered Beta</td> <td align="left">1.62</td> <td align="left">TradingView</td> </tr> <tr> <td align="left">Unlevered Beta</td> <td align="left">1.28</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Market Expected Return</td> <td align="left">9.40%</td> <td align="left">Motley Fools, 50y average</td> </tr> <tr> <td align="left">US Interest Rate</td> <td align="left">4.50%</td> <td align="left">Trading economics + 50bps</td> </tr> <tr> <td align="left">Risk Free Rate</td> <td align="left">4.15%</td> <td align="left">Yahoo Finance, 10y treasury bonds</td> </tr> <tr> <td align="left">Risk Premium</td> <td align="left">5.25%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Effective Corp Tax</td> <td align="left">1.48%</td> <td align="left">1.48%</td> </tr> <tr> <td align="left">CAPM</td> <td align="left">10.88%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">WACC</td> <td align="left">9.62%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17%</td> <td align="left">Moody's Seasoned AAA Corporate Bond Yield</td> </tr> <tr> <td align="left">EPS</td> <td align="left">0.41</td> <td align="left">Yahoo Finance</td> </tr> <tr> <td align="left">Average US GDP Growth</td> <td align="left">3.18%</td> <td align="left">TradingEconomics 1947 - 2022</td> </tr> <tr> <td align="left">Outstanding shares</td> <td align="left">611,402,300</td> <td align="left">Excel Stock Data 31/10/2022</td> </tr> <tr> <td align="left">Scenario 1 - Earning Based Growth Rate</td> <td align="left">-5.70%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">Scenario 2 - Legalization + perpetual growth</td> <td align="left">5%</td> <td align="left">Estimate Conservative</td> </tr> <tr> <td align="left">Scenario 3 - Legalization + ascending growth</td> <td align="left">5%, 10%, 15%, 20%</td> <td align="left">Computing</td> </tr> <tr> <td align="left">ROA</td> <td align="left">-10.90%</td> <td align="left">Computing</td> </tr> </tbody></table> <p>​</p> <h1>Macro Economic Data</h1> <table><thead> <tr> <th align="left">Data</th> <th align="left">Number</th> </tr> </thead><tbody> <tr> <td align="left">Market Expected Return</td> <td align="left">9.40%</td> </tr> <tr> <td align="left">Risk Free Rate</td> <td align="left">4.15%</td> </tr> <tr> <td align="left">Risk Premium</td> <td align="left">5.25%</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17%</td> </tr> <tr> <td align="left">Average US GDP Growth</td> <td align="left">3.18%</td> </tr> <tr> <td align="left">Current Market P/E</td> <td align="left">20.29</td> </tr> </tbody></table> <h1>Evaluation Methods</h1> <p>In this post, <strong>three evaluation methods are used</strong> to evaluate the company's final fair value. Each method gives us different current fair values for a single share of the company. The final price tag is determined by the average price between all the methods used.</p> <h2>Growth Rate</h2> <p><strong>The Growth Rate of -5.70%</strong> is calculated taking in count the previous year earnings and its historical ROE calculated by the average ROE from 2019 to 2022 of -5.70%.</p> <h2>Free Cash Flow Evaluation Model</h2> <p>This simple model takes in mind the company 2022 reported Free Cash Flow and its WACC based discounted rate of 9.62% and its Growth Rate of [<em>scenatio 1; scenario 2; scenario 3</em>]% to determine a fair value of:</p> <ol> <li>$0.10</li> <li>$0.37</li> <li>$0.77</li> </ol> <p>Note: the Scenario 2 and 3 is computed by using the assumption that the company will have positive free cash flow by end of 2023 as the managment planned, we assume a FCF of 10 milion</p> <h2>Adjusted Graham Fair Value Formula</h2> <p>This model is used in the Value Investing communities to price tag a company based on its intrinsic value. This formula is created by Benjamin Graham, a value investor and professor at Columbia University who is considered the father of Value Investing.</p> <p><strong>Intrinsic value = EPS × [(8.5 + (2 × Expected annual growth rate, g)]</strong></p> <p>Which 8.5 is the P/E base of a no-growth company, and the expected growth rate is the company perpetual growth rate for the future.</p> <p>In 1974, in the revised edition of <strong>The Intelligent Investor</strong>, Graham revised the formula to</p> <p><strong>Intrinsic value = [EPS × (8.5 + 2*g) × 4.4]/Y</strong></p> <p>In this formula, 4.4 is the then prevailing (1962) rate on high-grade corporate bonds listed on the New York Stock Exchange. Y is the current yield on AAA-rated corporate bonds.</p> <p>Graham thought that as the investor had the choice between putting money in common stocks or bonds, it was appropriate to take into account the rate of interest paid on a high-grade bond of 4.4 per cent in determining the intrinsic value of a stock.</p> <p>In this thesis we use an adjusted formula</p> <p><strong>Intrinsic value = [EPS × (7 + 1*g) × 4.4]/Y</strong></p> <p>The P/E of 7 is used because even if a company has zero growth prospects, but it is able to maintain cash flows and distribute dividends, its P/E is generally higher than 8.5.</p> <p>The used growth rate is the one calculated in the three scenarios.</p> <p>The '2' multiplier is too aggressive. Graham never experienced companies with growth rates of 15-25 per cent, which is common today. Instead of '2', here it is used 1 instead.</p> <p>The interest rate of 4.4 is left as the original, some modern adjustment put this value at 8.5, which is the five-year fixed deposit rate. This value is the substitute of the risk-free rate, which sometimes can be used instead of 4.4.</p> <p>Data used for the calculation:</p> <table><thead> <tr> <th align="left">EPS</th> <th align="left">4.66</th> </tr> </thead><tbody> <tr> <td align="left">Growth Rate</td> <td align="left">[Scenario 1; Scenario 2; Scenario 3]</td> </tr> <tr> <td align="left">AAA Bond Yield</td> <td align="left">5.17</td> </tr> </tbody></table> <p>The Adjusted Graham Intrinsic Value Formula gives us a price tag of</p> <ol> <li>$0.45</li> <li>$4.19</li> <li>$6.63</li> </ol> <p>​</p> <h2>Discounted Unlevered Free Cash Flow Model</h2> <p>A modified version of the traditional Discounted Cash Flow. This model instead of using the free cash flow, uses the unlevered one.</p> <p>Unlevered free cash flow (UFCF, also known as Free cash Flow to the Firm) is <strong>the amount of available cash a firm has before accounting for its financial obligations</strong>. Free cash flow (FCF), on the other hand, is the money a company has left over after paying its operating expenses and capital expenditures. It is used to remove the impact of capital structure on a firm's value and to make companies more comparable</p> <p>In simple words. It is the cash flow of a company based on the belief that the company owes no debt, therefore has no interest payments to make.</p> <p>In this model, it is taken in mind the following data:</p> <table><thead> <tr> <th align="left">WACC based discount rate</th> <th align="left">6.45%</th> </tr> </thead><tbody> <tr> <td align="left">Growth rate</td> <td align="left">[Scenario 1; Scenario 2; Scenario 3]</td> </tr> <tr> <td align="left">Average US GDP growth rate</td> <td align="left">3.18%</td> </tr> <tr> <td align="left">rage Shares outstanding</td> <td align="left">611,402,300</td> </tr> </tbody></table> <p>This model gives us a price tag of:</p> <ol> <li>-$3.22</li> <li>$1.12</li> <li>$4.97</li> </ol> <h2>Final Fair Value</h2> <p>The Final price tag is determined as per following:</p> <table><thead> <tr> <th align="left"></th> <th align="left">Fair Value</th> </tr> </thead><tbody> <tr> <td align="left">Scenario 1</td> <td align="left">-0.89</td> </tr> <tr> <td align="left">Scenario 2</td> <td align="left">$1.89</td> </tr> <tr> <td align="left">Scenario 3</td> <td align="left">$4.12</td> </tr> <tr> <td align="left"><strong>Average of the three scenarios</strong></td> <td align="left"><strong>$1.70</strong></td> </tr> </tbody></table> <h1>Historical Statistics</h1> <p>Statistics calculated on historical price movement in terms of percentile movement from 2018 to 2022</p> <table><thead> <tr> <th align="left">Minimum Expected Return</th> <th align="left">0.12%</th> </tr> </thead><tbody> <tr> <td align="left">Variance</td> <td align="left">0.60%</td> </tr> <tr> <td align="left">Standard Deviation</td> <td align="left">7.72</td> </tr> <tr> <td align="left">Max</td> <td align="left">56.75%</td> </tr> <tr> <td align="left">Median</td> <td align="left">-0.60%</td> </tr> <tr> <td align="left">Min</td> <td align="left">-49.68%</td> </tr> <tr> <td align="left">Average</td> <td align="left">0.10%</td> </tr> <tr> <td align="left">Kurtosis</td> <td align="left">10.93</td> </tr> <tr> <td align="left">Skewness</td> <td align="left">1.40</td> </tr> <tr> <td align="left">Standard Error</td> <td align="left">0.23%</td> </tr> <tr> <td align="left">Count</td> <td align="left">1084</td> </tr> </tbody></table> <p><strong>Main Population Density</strong></p> <table><thead> <tr> <th align="left">Bin</th> <th align="left">Frequency</th> <th align="left">Density</th> </tr> </thead><tbody> <tr> <td align="left"><strong>-6%</strong></td> <td align="left">63</td> <td align="left">5.93%</td> </tr> <tr> <td align="left"><strong>-4%</strong></td> <td align="left">117</td> <td align="left">11.01%</td> </tr> <tr> <td align="left"><strong>-2%</strong></td> <td align="left">180</td> <td align="left">16.93%</td> </tr> <tr> <td align="left"><strong>0%</strong></td> <td align="left">171</td> <td align="left">16.09%</td> </tr> <tr> <td align="left"><strong>2%</strong></td> <td align="left">167</td> <td align="left">15.71%</td> </tr> <tr> <td align="left"><strong>4%</strong></td> <td align="left">97</td> <td align="left">9.13%</td> </tr> <tr> <td align="left"><strong>6%</strong></td> <td align="left">72</td> <td align="left">6.77%</td> </tr> <tr> <td align="left"><strong>8%</strong></td> <td align="left">36</td> <td align="left">3.39%</td> </tr> </tbody></table> <p>​</p> <h1>SWOT Analysis</h1> <h2>Strengths</h2> <ul> <li><strong>Distribution and Reach</strong>: Tilray Inc has a large number of outlets in almost every state, supported by a strong distribution network that makes sure that its products are available easily to a large number of customers in a timely manner</li> <li><strong>Dealer Community</strong>: Tilray Inc has a strong relationship with its dealers that not only provide them with supplies but also focus on promoting the company's products and training.</li> <li><strong>Return on Capital Expenditure</strong>: Tilray Inc has been successfully able to generate positive returns on the capital expenditure it has incurred on various projects in the past.</li> <li><strong>Automation</strong>: of various stages of production has allowed the more efficient use of resources and reducing costs. It also allows for consistency in quality of its products and provides the ability to scale up and scale down production as per the demand in the market.</li> <li><strong>Skilled Labor force</strong>: Tilray Inc has invested extensively in the training of its employees that has resulted in it employing a large number of skilled and motivated employees.</li> <li><strong>Tilray Inc has a diversified workforce</strong>, with people of many geographical, racial, cultural and educational backgrounds that help the company by bringing in diverse ideas and methodologies of doing things.</li> <li><strong>Tilray Inc has qualified and accredited professionals</strong> working under in its team.</li> <li><strong>Entering new markets</strong>: Tilray Inc’s innovative teams have allowed it to come up with new products and enter new markets. It has been successful in past, in most of the initiatives it has taken in new markets.</li> <li><strong>Website</strong>: Tilray Inc has a well-functioning and interactive website that draws a large number of internet traffic and sales.</li> <li><strong>Product Portfolio</strong>: Tilray Inc has a large product portfolio where it provides products in a large range of categories. It has a number of unique product offerings that are not provided by competitors.</li> <li><strong>The geography and location of Tilray Inc</strong> provide it with a cost advantage in serving its customers, when compared to that with the competition.</li> <li><strong>Tilray Inc has a well-established IT system</strong> that ensures efficiency in its internal and external operations.</li> <li><strong>Tilray Inc owns a number of intellectual property rights</strong> that include trademarks and patents. These allow it exclusivity over its products and competitors cannot copy or reverse engineer them.</li> <li><strong>Tilray Inc is a brand that has been in the market for years</strong>, and people are aware of it. This makes its brand awareness high.</li> <li><strong>Its products have maintained quality over the years</strong> and are still valued by customers, who find it as good value for the amount of money that they pay.</li> <li><strong>Partnership</strong>s: Strategic partnerships are established by Tilray Inc with its suppliers, dealers, retailers and other stakeholders. This allows it to leverage them if need be in the future.</li> </ul> <h2>Weaknesses</h2> <ul> <li><strong>Research and Development</strong>: Even though Tilray Inc is spending more than the average research and development expenditure within the industry, it is spending way less than a few players within the industry that have had a significant advantage as a result of their innovative products.</li> <li><strong>High Day Sales Inventory</strong>: The time it takes for products to be purchased and sold are higher than the industry average, meaning that Tilray Inc builds up on inventory adding unnecessary costs to the business.</li> <li><strong>Rented Property</strong>: A significant proportion of the property that Tilray Inc owns is rented rather than purchased. It has to pay large amounts of rent on these adding to its costs.</li> <li><strong>Low current ratio</strong>: The current ratio that shows the company’s ability to meet its short term financial obligations, is lower than the industry average. This could mean that the company could have liquidity problems in the future.</li> <li><strong>The company has low levels of current assets compared to current liabilities</strong>, and this can create liquidity problems for it in operations.</li> <li><strong>Cash flow problems</strong>: There is a lack of proper financial planning at Tilray Inc regarding cash flows, leading to certain circumstances where there isn’t enough cash flow as required leading to unnecessary unplanned borrowing.</li> <li><strong>Integration</strong>: Tilray Inc's current structure and culture have resulted in the failure of various mergers aimed at vertical integration.</li> <li><strong>Market Research</strong>: Tilray Inc has not conducted market research within the market that is serves since the past 2 years. As a result, it is making decisions based on years old data, while customer needs may have evolved over time.</li> <li><strong>High employee turnover rates</strong>: Tilray Inc has a higher employee turnover rate compared to competitors. This means that it has more people leaving the job, and as a result, it is spending more on training and development as employees keep leaving and joining.</li> <li><strong>Quality Control</strong>: Tilray Inc has a lower budget for its quality control department than competitors. This leads to lack of consistency and the possibility of damage to quality across its various outlets.</li> <li><strong>Lack of legal experience</strong> and legal department employees are not highly qualified.</li> <li><strong>A few products have a high market share</strong>, while most of the products have a low market share. This reliance on a few products makes Tilray Inc vulnerable to external threats if these few products suffer for any reason.</li> <li><strong>The workload is a high per worker</strong> as there are fewer workers than the actual work required. This puts workers under psychological stress and is likely to be less productive.</li> <li><strong>Worker morale is low due to company culture</strong> and politics that have grown in recent years.</li> <li><strong>Competition and qualified employees have been leaving</strong> the organisation in recent years, which could mean a shortage of good talent for the company in the upcoming years.</li> <li><strong>The decision making is highly centralized</strong>, and decisions by teams need to be approved by certain officials. This reduces efficiency in operations by making them more time consuming. It also leads to reduced innovation.</li> <li><strong>The performance appraisal is not in a systematic manner</strong>. People are often not appraised for their performance. This leads to lower work morale and lack of promotion opportunities for employees.</li> </ul> <h2>Opportunities</h2> <ul> <li><strong>Internet</strong>: there has been an increase in the number of internet users all over the world. This means that there is an opportunity for Tilray Inc to expand their presence online; by using the internet to interact with its customers.</li> <li><strong>E-commerce</strong>: There has been a new trend and a growth in sales of the e-commerce industry. This means that a lot of people are now making purchases online. Tilray Inc can earn revenue by opening online stores and making sales through these.</li> <li><strong>Social Media</strong>: there has been an increase in the number of social media users worldwide. The three social media platforms; Facebook, Twitter and Instagram, have shown the greatest number of increase in monthly active users. Tilray Inc can use social media to promote its products, interact with customers and collect feedback from them.</li> <li><strong>Technological developments</strong>: technology comes with numerous benefits among many departments. Operations can be automated to reduce costs. Technology enables better data to be collected on customers and improves on marketing efforts.</li> <li><strong>Population</strong>: the population has been growing and is expected to grow at a positive rate for the upcoming years. This is beneficial for Tilray Inc as there will be an increase in the number of potential customers that it can target.</li> <li><strong>Green government drive</strong>: this provides an opportunity for Tilray Inc for the sale of Tilray Inc's products to federal and state government contractors.</li> <li><strong>Transport Industry</strong>: the transport industry has been flourishing in the past few years, and shows growth potential in the future. This has reduced the costs of transportation, which is beneficial for Tilray Inc as it will lower its overall costs.</li> <li><strong>Tax policy:</strong> the governments’ reduction in tax rate is beneficial for Tilray Inc as a lower amount would be expensed out as a tax.</li> <li><strong>Tourism:</strong> growth in tourism is beneficial for Tilray Inc as it will provide new potential customers that it can target in order to gain market share.</li> <li><strong>Skilled workers:</strong> increase in education and training by numerous institutes has increased the amount of skilled labor available within the country. This means that if Tilray Inc is able to hire skilled labor, it would have to spend less on training and development, therefore, saving costs.</li> <li><strong>A number of new niche markets have opened up that are growing</strong>. Tilray Inc can sell products in these markets and take advantage.</li> <li><strong>Globalisation</strong>: Increased globalisation does not restrict Tilray Inc to its own country. It can extend its operations to other countries, entering into these markets and making use of the opportunities that lie in these markets.</li> <li><strong>Consumers within the industry are becoming more conscious of health, and this is a segment that is growing</strong>. Tilray Inc can take advantage by manufacturing products that are beneficial to customer's health.</li> <li><strong>Trade barriers have been reduced on the import of goods</strong>. This will reduce the costs incurred on inputs for production.</li> <li><strong>Regulations have loosened in recent years</strong> making it easier for businesses to carry out their operations.</li> </ul> <h2>Treats</h2> <ul> <li><strong>Technological developments by competitors</strong>; New technological developments by a few competitors within the industry pose a threat to Tilray Inc as customer attracted to this new technology can be lost to competitors, decreasing Tilray Inc’s overall market share.</li> <li><strong>Suppliers:</strong> The bargaining power of suppliers has increased over the years with the decrease in the number of suppliers. This means that the costs of inputs could increase for Tilray Inc.</li> <li><strong>New entrants:</strong> there have been numerous players that have entered the market and are gaining market share by gaining existing companies’ market share. This is a threat to Tilray Inc as it can lose its customers to these new entrants.</li> <li><strong>Increasing competition</strong>: there has been an increase in competition within the industry putting downward pressure on prices. This could lead to reduced revenue for Tilray Inc if it adjusts to the price changes, or loss of market share if it doesn’t.</li> <li><strong>Exchange Rate:</strong> the exchange rate keeps fluctuating and this affects a company like Tilray Inc that has sales internationally, while its suppliers are local.</li> <li><strong>Political uncertainties</strong> in the country prove to be a barrier in business, hindering performance at times and making the business incur unnecessary costs.</li> <li><strong>The fluctuating interest rates</strong> in the country do not provide a stable financial and economic environment.</li> <li><strong>Consumer tastes are changing</strong>, and this puts pressure on companies to constantly change their products to meet the needs of these customers.</li> <li><strong>Substitute products available are also increasing</strong>, which is threat collectively for the whole industry as consumption of current products decrease.</li> <li><strong>The rise in prices of fuel</strong> has increased in the input costs for Tilray Inc. These costs have also increased as other industries that provide inputs for this company also have suffered from increasing fuel prices, thereby charging more.</li> <li><strong>Increased promotions by competitors</strong> have been a threat for Tilray Inc. On most media, there is more clutter than ever, and customers are bombarded with multiple messages. This reduces the effectiveness of promotional messages by Tilray Inc.</li> <li><strong>Constant technological developments require the workforce to be trained</strong> accordingly as the inability to keep up with these changes can lead to loss of business for Tilray Inc.</li> </ul> <h1>Ratios</h1> <p><strong>Management Effectiveness</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">ROC</td> <td align="left">-3%</td> <td align="left">-1%</td> <td align="left">0%</td> </tr> <tr> <td align="left">ROE</td> <td align="left">-9.72%</td> <td align="left">-7.54%</td> <td align="left">-4.60%</td> </tr> <tr> <td align="left">ROIC</td> <td align="left">-4.69%</td> <td align="left">-1.92%</td> <td align="left">0.12%</td> </tr> </tbody></table> <p>​</p> <p><strong>Financial</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">Working Capital</td> <td align="left">2.87</td> <td align="left">2.20</td> <td align="left">5.30</td> </tr> <tr> <td align="left">Acid Test</td> <td align="left">1.82</td> <td align="left">1.46</td> <td align="left">3.40</td> </tr> <tr> <td align="left">Debt Ratio</td> <td align="left">11.45%</td> <td align="left">15.58%</td> <td align="left">16.67%</td> </tr> </tbody></table> <p><strong>Value</strong></p> <table><thead> <tr> <th align="left">Indicator</th> <th align="left">2022</th> <th align="left">2021</th> <th align="left">2020</th> </tr> </thead><tbody> <tr> <td align="left">Price to Book Ratio</td> <td align="left">0.52</td> <td align="left">0.52</td> <td align="left">1.76</td> </tr> <tr> <td align="left">Income Quality</td> <td align="left">-0.41</td> <td align="left">-0.13</td> <td align="left">-1.58</td> </tr> </tbody></table> <p>​</p> <h2>Analysts Price Target</h2> <table><thead> <tr> <th align="left"><strong>Scenario</strong></th> <th align="left">Price Target</th> </tr> </thead><tbody> <tr> <td align="left"><strong>High</strong></td> <td align="left">$12</td> </tr> <tr> <td align="left"><strong>Average</strong></td> <td align="left">$4.86</td> </tr> <tr> <td align="left"><strong>Low</strong></td> <td align="left">$2</td> </tr> </tbody></table> <p><strong>OP’s Price Target</strong></p> <table><thead> <tr> <th align="left">Scenario 1 (Bad)</th> <th align="left">-0.89</th> </tr> </thead><tbody> <tr> <td align="left">Scenario 2 (Normal)</td> <td align="left">$1.89</td> </tr> <tr> <td align="left">Scenario 3 (Positive)</td> <td align="left">$4.12</td> </tr> </tbody></table> <p>​</p> <h1>Final Considerations</h1> <p><strong>What is its future potential?</strong></p> <p>Without Legalization, the company is destined to fail. It is burning its cash at a 2.09 rate, leaving it only 25 months of life expectancy (take in mind that this is an assumption cause obviously in those 25 months the company will have sales and other operations bringing in cash, the life expectancy is calculated on the assumption the company will not have further sales or other income of cash, so take this data as indicative). If we assume a recover of macro data, consumption shall growth in other segments in which the company operates, cause marijuana is not its biggest nor main revenue stream. The company is well diversified of even without legalisation we shall expect to see it aroun in the next 5 years.</p> <p>With Legalizaion, it is moon time baby. Its fundamentals, at the most conservative assumptions, prices it around 4$ but we all know that hype will push it further that price level bring it to be overvalued. Retailers and institution will surely try to cash in the hype so beware of speculative plays.</p> <p>With the legalization scenarios, we can expect two outcomes:</p> <ol> <li>The Management do not manage to contain costs and improve efficiency, making it growth slow</li> <li>The Management manages to cut cost and boost efficiency, making Tilray grow</li> </ol> <p>There is potential, but risk is very high</p> <p><strong>What are the risks?</strong></p> <p>Observing statistical data about Tilray's price movements, we can except a 7.72% risk rate. The Stock's return distribution is concentrated around negative numbers. If you want to invest for long time expect a miminum retuern rate of 0.12% and a 44% chancge of getting a daily price movement between -4% and 0%</p> <p><strong>Is the company a Buy or a Sell?</strong></p> <p>This is hard. It all depend on legalization in the USA, and if it happens, it depends on when it happens. If legalization comes in 5 years, welp, this company is going tits up, but if it come next week, well, you know the drill.</p> <p>Personally this stock is a Gamble, cause its fate is determined heavily by politics.</p> <p>Are you a Gamblerer?</p> <p>​</p> <p>​</p> <p>​</p> <p><strong>What are you thoughts? Is Tilray a Buy or a Sell? Let us all know!</strong></p> <p><strong><em>This is not a financial advice.</em></strong></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/YungChaky"> /u/YungChaky </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/yo3i6d/tilray_brands_tlry_stock_evaluation/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/yo3i6d/tilray_brands_tlry_stock_evaluation/">[comments]</a></span>