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Discourse-provoking: Invest in cannabis or technology? - Walla! Of money

2022-03-22T08:27:56.556Z


Sheikh Medical has released reports showing that the stock multiplier is similar to that of technology giant Microsoft, despite "small" differences in profit margins


Discourse-provoking: Invest in cannabis or technology?

Sheikh Medical has released reports showing that the stock multiplier in its shares is similar to that of technology giant Microsoft, despite "small" differences in profit margins.

How does this happen and what does it say about the investment?

Roast Greenberg

22/03/2022

Tuesday, 22 March 2022, 10:12 Updated: 10:18

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This little one will be even bigger?

Judging by the multiplier in which the medical cannabis company 'Sheikh Medical' is traded - there are investors who probably consider it very large: Sheikh is traded on the Tel Aviv Stock Exchange worth NIS 119.8 million and the annual total profit it presented yesterday (Monday) in its financial statements was about 3.49 million NIS - a decrease of 72.2% compared to the total profit presented in its financial statements for 2020.



The company's value represents a multiplier (divided by the annual profit and constitutes the expected return on investment) of 34.3, similar to the multiplier in which the technology giant Microsoft trades - 36.4.



This is because Microsoft is traded on the Nasdaq US Stock Exchange at a value of about $ 2.23 trillion and in its financial statements for 2021 it presented a net profit of about $ 61.2 billion.

Compared to a discourse, Microsoft's profit represents an increase of about 38.2% compared to the net profit it presented in 2020.



It should be noted that Sheikh showed an impressive increase of about 82.8% in its revenues, which stood at about NIS 67.3 million for the last reporting year, and an operating profit of about NIS 5.9 million for 2021 - an increase of about 68.6%.



But while the rates of increase that discourse has presented in its sections of the report are declining as they get closer to the bottom line, those at Microsoft are rising.



The technology giant's net profit margin was higher than the operating profit margin, which rose by about 32.1%, to about $ 69.9 billion, which in turn was higher than the revenue rate that stood at about 17.4% for the last fiscal year, and stood at about $ 168 billion.



Sheikh noted that it has completed the assimilation of its holdings in 2 pharmacies it acquired during 2021, and that its revenues have increased, among other things, through the imports it has made.

The company did not detail how much of its revenue comes from imports, how much from self-growth and how much from purchases from other Israeli cannabis players.

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"We will be one of the strongest companies"

Yogev Sarid, CEO of the medical cannabis company Sheikh Medical

, told Walla! Money that “this year we made a separation between wholesale and retail sales, to allow investors to better examine the data.



The amount specified in the wholesale sales contains both the production capacity in Givat Hen, both the produce that we purchase in Israel, and the produce that we import.



In our view, we are in the right mix of activities ranging from imports to self-production and acquisitions of other Israeli players, including satellite farms, as this allows us to be less sensitive to regulatory changes.



As for total profit, then a major part of the gap between it and the rate of increase in revenue stems from accounting facilities, which do not represent the true activity of the company, such as fair value, subsidiaries, changes in fair consideration, and more.



In addition, it should be remembered that in 2020 we still sold products under the old regulation (products sold without passing through medical cannabis plants and pharmacies) and the gross profit in them was higher than the products in the new regulation.



Discourse has grown in its market share, and this can be seen in the growth rate that the company experienced compared to the growth rate of the Israeli cannabis market, which stood at 25% -30%.

It is estimated by a number of market participants that in the State of Israel there will be about 4 to 5 strong and profitable companies, along with some small boutique companies, and we will be one of the strongest.



"We are preparing financially with a strong cash flow for the benefit of opportunities that will emerge in the Israeli market in the coming year, and are working to develop our pharmacy chain, as part of a business synergy, from the growth stage to branding to the end customer."

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  • Microsoft

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Source: walla

All business articles on 2022-03-22

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