With a proven track record of profitable growth and branding that works, Cresco Labs (Cresco Labs Stock Quote, Chart CSE:CL) is a “Buy,” says GMP Securities analyst Robert Fagan, who on Thursday initiated coverage of the company with a C$20.00 target, representing a projected 12-month return of 32.6 per cent at the time of publication.

Formed in 2013, Chicago-based Cresco Labs’ story has so far focused on wholesale, branding and distribution, becoming one of the first movers to win licenses and enter the markets in Illinois, Pennsylvania and Ohio. More recently, the company has added exposure in a number of other states while also growing its retail presence, boosted by the recent acquisition of VidaCann in Florida.

Fagan believes that Cresco Labs’ platform provides an attractive combination of vertically-integrated retail and national brand distribution, having four distinct brands: Remedi (for medical), Mindy’s (recreationally focused edibles, Reserve (connoisseur) and Cresco (mass appeal).

Moreover, Fagan likes its profitability, where Cresco Labs has an annualized EBITDA of $12-million, making it the only large profitable public multi-state operator based on last quarterly results and the only MSO which consistently improved its profitability profile on a sequential basis over 2018. (All figures in US dollars unless noted otherwise.)

“CL has established the second largest production platform amongst public MSOs in markets where wholesale is permitted, nearly double the size of all peers outside of Curaleaf,” writes Fagan. “Matched with its apparent strong branding power, we believe CL could capture an outsized market share, particularly in NY and IL where REC conversion is likely in the medium term. This could translate into ~$3-6 per share of upside to our target price assuming REC sales begin in 2020 in both states.”

Fagan thinks that CL will generate fiscal 2018 revenue and EBITDA of $40.4 million and $7.1 million, fiscal 2019 revenue and EBITDA of $185.2 million and $44.2 million, and fiscal 2020 revenue and EBITDA of $501.0 million and $196.0 million. His price target comes from a 20x multiple of his 2020 EBITDA forecast plus $30 million of EBITDA that he assumes is acquired.