The stocks of U.S.-focused operators have rallied while Canada-focused operators have underperformed in the second-quarter earnings season, closing the valuation gap on enterprise value-to-2021 sales.
The rally in the United States bodes well for the thawing of the capital markets for U.S. operators – at least for those that can show strong and profitable revenue growth.
Since at least January and as recently as April, U.S.-focused stocks have traded at a discount to Canada-focused stocks, despite showing faster revenue growth and higher margins in a larger market with more legalization catalysts.
Federal illegality in the U.S. subjects the operating companies to an onerous tax rate under IRS Section 280E, limits their access to traditional banking and prevents investment by many institutional investors and traditional consumer-operating companies.
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