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Cannabis sector valuations continue to climb new heights, raising fresh concerns that a pullback is overdue and some investors could get dinged.

The marijuana industry was trading at 41.1 times projected 2019 earnings before interest, taxes, depreciation and amortization (EBITDA) as of Friday, according to Echelon Wealth Partners. That is the highest valuation on record, in weekly data that go back to January of 2017. Pot stocks have been riding a multi-week rally, sparked when U.S. alcohol giant Constellation Brands Inc. made a multibillion-dollar investment in Canopy Growth Corp., along with rumours of other deal-making.



In its report, Echelon also looked at valuations for “comparable” non-cannabis companies – including alcohol and tobacco firms, which are sometimes referred to as “sin stocks.” No surprise, cannabis valuations are considerably more stretched.



One takeaway: It’s generally cheaper to invest in non-cannabis companies that have, or are looking to get, a taste of the marijuana sector. For instance, Canopy Growth is trading at 178 times projected 2019 EBITDA as of Friday. But Constellation Brands, which will have a near-40-per-cent stake in Canopy after approvals, is trading at 15.7 times projected earnings.

That’s also the case with Molson Coors Brewing Co. and Hydropothecary, recently rebranded as Hexo Corp. Molson Coors Canada announced in August it was partnering with the Quebec-based producer on a new joint venture to develop non-alcoholic, cannabis-infused beverages. As part of the deal, Hexo issued warrants to Molson to buy shares in the cannabis producer. Molson Coors is trading at 9.6 times projected 2019 EBITDA, compared with 28.8 for Hexo.