US multi-state operator Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News CSE:GTII) gets the nod from Echelon Wealth Partners where analyst Matthew Pallotta launched coverage of the stock on Monday with a “Buy” rating and Top Pick designation within the US cannabis sector.

Illinois-based Green Thumb Industries currently has vertically-integrated operations across 12 states including 30 retail dispensaries (including pending acquisitions) and 11 cultivation and processing facilities. The company sells products for the both the medical and adult-use markets along with CBD-infused products and sales in over 400 dispensaries nationwide. Its core brands include Rythm, Dog Walkers, The Feel Collection and hemp-derived CBD brand Beboe, which is sold in high-end retail locations including Barney’s New York and Neiman Marcus.

Pallotta says GTII’s business model is focused on winning the widest scale distribution for its brands in each market in which it operates, with the aim of building a portfolio of nationally-distributed and recognized brands.

“Ultimately, this strategy is not so different from that of most of its MSO peers,” writes Pallotta in his coverage initiation. “However, what we feel separates the Company is its measured approach to growth, and ability to execute. Paraphrasing what management has stated publicly, its goal is not to simply be the largest cannabis company but the best operated, with each decision made through the lens of return to shareholders. GTI has maintained a steadfast focus on allocating resources to markets and categories where it can build a defensible competitive advantage, and eschewed the ‘growth for the sake of growth’ strategy we believe is being taken by many of its like-sized MSO peers and its peers in Canada.”

The analyst attests that at this time GTII is the only US cannabis stock in Echelon’s coverage universe to receive a “Buy” rating, with a number of points in its favour, including its industry-leading portfolio of assets and licenses (GTII is licensed to open up to 96 dispensaries nationally, third highest among MSOs, says Pallotta), its retail operations under its Rise and Essence banners which are the strongest the analyst has seen, along with its strong distribution footprint and management team that has generated a proven track record of accretive M&A and capital allocation.

Moreover, Pallotta thinks that with the recent sector-wide selloff, GTII is now 49 per cent lower than its recent peak in April of this year, making the stock a bargain at current prices.

“The stock’s current level implies a 119 per cent discount to our estimate of intrinsic value based on our DCF model – a level of discount we believe warrants consideration for any investor looking for exposure to the US cannabis sector. We also note the Company is trading at a discount to the peer group average on a price to Adjusted Book Value of Equity basis (2.9x vs. 3.7x average), which in our view is not justified,” writes Pallotta.

The analyst sees Green Thumb generating fiscal 2019 revenue and adjusted EBITDA of $205.6 million and $4.0 million, respectively, and fiscal 2020 revenue and adjusted EBITDA of $469.0 million and $98.9 million, respectively. Pallotta is starting GTII off with a C$24.00 target which represents a projected 12-month return of 119 per cent at the time of publication. (All figures in US dollars unless where noted otherwise.)