Tilray Brands, Inc. (TLRY) researches, cultivates, produces, and distributes medical cannabis products. The company operates through its five broad segments Cannabis Business; Distribution Business; Beverage Alcohol Business; Wellness Business; and Business Under Development.

TLRY popped up on its announcement of a new cannabis product. On July 6, TLRY announced that its cannabis brand Good Supply had expanded its product offering with the launch of Hash-Infused Pre-Rolls in Québec, which offers the brand’s strains, Jean Guy and Starwalker Kush, with a proprietary premium hash blend. 

Earlier, on June 29, the company announced that Tilray Medical, its medical cannabis division, had expanded its offerings in the United Kingdom. These expansions might add to the company’s revenue stream in the future.

Moreover, investors are assessing the impressive prospects of the cannabis industry in the long run. However, the stock has declined 80.5% over the past year and 55.2% year-to-date to close its last trading session at $3.15. It has slumped 7.9% intraday.

Additionally, Piper Sandler Companies (PIPR) analyst Michael Lavery cut the stock’s price target of $6 to $3 a share due to the company facing tough market conditions. Lavery cited headwinds from the Canadian cannabis market and softer U.S. alcohol sales for the target slash.

Here are the factors that could affect TLRY’s performance in the near term:

Negative Trailing-12-Months Financials

TLRY’s trailing-12-months EBITDA came in at a negative $35.20 million, while its trailing-12-months operating income stood at a negative $173.57 million. The company’s trailing-12-months net operating cash flow and levered free cash flow were a negative $148.49 million and a negative $5.03 million.

Bleak Profit Margins

TLRY’s trailing-12-months gross profit margin of 23.66% is 57.4% lower than the industry average of 55.49%. Its trailing-12-months EBIT margin and EBITDA margin of a negative 28.12% and 5.70% are considerably lower than their respective industry averages of 1.27% and 4.28%.

POWR Ratings Reflect Bleak Prospects

TLRY’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

TLRY has a Momentum grade of F, consistent as it is trading lower than its 50-day and 200-day Moving Averages of $4.06 and $7.08.

The stock has a C grade for Value. This is justified by its forward EV/EBITDA multiple of 42.77, which is 221% higher than the industry average of 13.32. On the other hand, in terms of its forward Price/Sales, it is trading at 2.49x, 45.4% lower than the industry average of 4.56x.

In the 171-stock Medical – Pharmaceuticals industry, it is ranked #155. The industry is rated F.

Click here to see the additional POWR Ratings for TLRY (Growth, Stability, Sentiment, and Quality).

View all the top stocks in the Medical – Pharmaceuticals industry here.

Bottom Line

Although investors are turning bullish on TLRY, the anticipated headwinds could hamper its near-term prospects. Moreover, its bleak profit margins are concerning. So, I think the stock could be best avoided now.

How Does Tilray Brands, Inc. (TLRY) Stack Up Against its Peers?

While TLRY has an overall POWR Rating of D, one might consider looking at its industry peers, Merck & Co. Inc. (MRK) and Novartis AG (NVS), which have an overall A (Strong Buy) rating, and Zoetis Inc. (ZTS) and Taro Pharmaceutical Industries Ltd. (TARO), which have an overall B (Buy) rating.

TLRY shares were trading at $3.22 per share on Tuesday morning, up $0.07 (+2.22%). Year-to-date, TLRY has declined -54.20%, versus a -18.38% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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