Go To

1 Reason To Avoid Grow Generation As The US Moves To Legalize Marijuana

Over the last couple months, I’ve shown you stocks to avoid…

Stocks to consider buying…

And some of the best stocks related to the coming Internet of Things…  Which you can find linked further below.

All these recommendations are to help you either avoid pain and terrible stocks.  Or to help you find potentially great stocks to invest in during this pandemic.

If you do both well, it helps you earn higher than average investment returns and build wealth.

Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.

Today, I want to show you 1 Reason To Avoid Grow Generation As The US Moves To Legalize Marijuana.

Grow Generation Corp (GRWG) owns and operates specialty hydroponic and organic gardening stores in the United States.

This is especially important as the United States looks poised to legalize marijuana at the federal level in the coming months.  And Grow Generation would benefit enormously.

It’s based in Denver Colorado.  It has a $2.09 billion market cap. And its enormously overvalued.

1 Reason To Avoid Grow Generation – Its Massively Overvalued

Normally in these articles I talk to you about things like profits, cash flows, balance sheet strength, debt levels, competitive advantages, Covid’s effects on the business, and much more.

But frankly none of that matters with Grow Generation because its enormously overvalued.

With the markets at or near all-time highs you’d expect a rapid growth stock like Grow Generation with a huge potential tail wind with the likely legalization of pot to be selling at a huge valuation.  And it is.

As of this writing its P/E is 577.1.

Its P/CF is 738.8.

Its forward P/E is 103.1.

And its enterprise value to operating income – EV/EBIT is 405.3.

On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

This means, Grow Generation is overvalued by a massive amount right now.

And this means owning its stock gives you no margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning its stock going forward.

With Grow Generation being overvalued it makes the investment riskier.

But why is it so overvalued?

For two main reasons.

  1. Is the expected legalization – or at minimum decriminalization – of marijuana at the federal level in the United States.

With Joe Biden and the Democrats taking control of the US government for the next 2 years at least, marijuana looks poised to become legalized in the United States soon.

How much of a difference did Democrats taking control of the US government have on Grow Generation alone?

Since the day after the Presidential election back on November 3rd, 2020, Grow Generation stock is up 112.9%.

This after it became clear Democrats were at worst going to control the United States House of Representatives and the Presidency.

A month later when Democrats took control of the United States Senate after a couple run off elections cleared the path for total Democratic control… And the likely legalization of marijuana because this is one of the major things they campaigned on.

Because Grow Generation will benefit enormously from this, its stock has skyrocketed since then.

2. Another factor leading to this huge growth in its share price…  When marijuana is legalized – at this point it looks like a near certainty – the market opportunity is massive for companies like Grow Generation.

By 2025 the legal pot market in the US is expected to become a $41 billion industry.

And Grow Generation is one of the companies that will benefit enormously.

Even with this huge opportunity though, I still recommend you avoid Grow Generation stock due to its massive valuation.

This large valuation makes buying Grow Generation stock enormously risky right now… Especially since marijuana still must become legalized.


If you’re looking for a solid, safe, stable, and enormously profitable investment to buy to earn high and safe returns for your portfolio – consider investing in one of the stocks below.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

Comments are closed.