KushCo Files for NASDAQ Listing – Should We Expect High Growth?

KushCo Holdings, Inc. will likely trade on a major U.S. exchange in the very near future. The Garden Grove, California-based consumer and industrial-product company filed to list on the Nasdaq Capital Market. Currently, most American marijuana companies trade on pink sheets.

Moving to the NASDAQ could be huge not only for KushCo but also for the American marijuana industry as a whole. KushCo stock will probably attract new investors with this listing. More importantly, it may command a much higher valuation when investors make one key discovery.

Restrictions Have Discouraged Listing On Major Indexes

Since KushCo does not sell the cannabis itself, it escapes many of the Schedule I-related restrictions hampering other American marijuana stocks.

American marijuana companies have lagged most Canadian producers such as Canopy Growth (NYSE:CGC) and Aurora (NYSE:ACB) at listing on major exchanges. Marijuana companies commonly operate in states with legal recreational or medical marijuana sales. However, in many cases, the Schedule I designation limits their expansion across state lines. This offers little incentive, and often little funding, to finance a listing on the NYSE or the NASDAQ.

But here’s the thing.

KushCo is not technically a marijuana producer. It consists of four subsidiaries, Kush Supply, Kush Energy, The Hybrid Creative, and Koleto Innovations, all of which provide ancillary services to the industry. Since it does not sell the cannabis itself, it escapes many of the Schedule I-related restrictions hampering other American marijuana stocks. Not only does KushCo cross state lines, but it also attracts customers throughout North America, South America, and Europe.

KushCo Brings Growth With Less Downside

The key factor that could attract investors revolves around growth.

Even though it faces less onerous restrictions than most U.S.-based marijuana companies, it enjoys growth rates comparable to its major Canadian counterparts. Analysts forecast revenue growth of 182% for the current fiscal year and 63.7% in fiscal 2020.

In comparison, industry leader Canopy Growth expects revenues to grow by 204.8% this year and 83.6% in fiscal 2020. This slightly exceeds KushCo’s growth. However, Canopy trades at a price-to-sales (P/S) ratio of almost 78. KushCo stock sells at around 4.8 times sales.

The S&P 500’s average P/S ratio stands at about 2.2. Hence, KushCo already commands a valuation premium. However, if KushCo could reach a multiple near where Canadian cannabis stocks trade, it could enjoy a massive surge after that NASDAQ listing becomes a reality.

Regardless of how high KushCo stock goes, more inflows into KushCo stock are almost guaranteed. Current rules bar some types of financial institutions from buying OTC stock. However, with a move to the NASDAQ, KushCo will likely appear in more ETFs and mutual funds. That buying should help take the stock higher.

Concluding Thoughts

KushCo has decided to follow the lead of the top Canadian producers and list on a major U.S. exchange. Assuming KushCo stock sells on the NASDAQ, the fact that it tracks the growth levels of marijuana stocks, without the Schedule I restrictions, mean it could attract significant investment.

Specifically, KushCo’s stock would be available to more investors forbidden from buying OTC stocks and it could also bring massive valuation gains if it starts trading at similar P/S ratios as Canadian cannabis equities.

With so few American marijuana stocks trading on the major exchanges, it remains unclear exactly how much additional investment KushCo will attract. But, with the multiples of marijuana stocks remaining high, investors who missed the bull market in marijuana stocks in 2017 and 2018 may get a second chance with KushCo stock.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Will Healy
Will Healy is a freelance business and financial writer based in the Dallas area. In addition to marijuana, energy, and mining stocks, he has also written about real estate, insurance, personal finance, and macroeconomics.In addition to Capital 10X, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance, GOBankingRates, and Seeking Alpha.Will holds a B.S. in Journalism from Texas A&M University, an M.S. in Geography from the University of North Texas, and an MBA from the University of Texas at Dallas.Phone: 416-721-8257. Address: 682 Indian Road Toronto, Ontario M6P 2C9.

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