Are cannabis stocks still overvalued?

The cannabis industry has witnessed a new phase since the legalization of marijuana in October last year. Canada became the first industrialized country in the world to allow the consumption of weed on an adult level. This decision has raised the sales and the stocks have skyrocketed since then. However, people believe that cannabis stocks have become overvalued as a result of the political and economic environment in North America.

The value of stocks simply exists in the eye of beholder and they tend to be arbitrary by definition. These stocks are overvalued as price-to-earnings ratios are complicated. However, there is a silver lining. It is a misconception that being overvalued is also being a sham as marketplaces don’t work this way. There are factors like price-to-earnings ratios and potential of cash flow. The cash flow is not smooth as there are no credit card entries and there are complications of value and liquidity in cannabis trade at the moment.

The right-pricing will begin once the companies and organizations realize that this is not how the industry will grow. The general awareness will rise steadily and people will understand the demand and supply of cannabis products gradually. This will make the value of stocks in the normal range.

It has been noticed that supplies and traders are circumventing the legalized arm while marijuana investors were previously pricing stocks of marijuana from the illegal trade side. The prices will swiftly change as the legalization has taken place and there are now all kinds of big and small companies.

The bubble of overvalued marijuana stocks will finally burst when cheaper cannabis products hit the market by next year and it is expected that privately held companies would break into the monopoly of large scale traders and investors who are only in this business for profiteering.


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