Bell Potter slaps buy rating on this profitable, dividend-paying ASX cannabis share

This cannabis share is smoking the market on Monday…

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The Cronos Australia Ltd (ASX: CAU) share price was a strong performer on Monday.

The medicinal cannabis company's shares ended the day 15% higher at 55 cents.

At one stage, the Cronos Australia share price even reached a record high of 58 cents.

Why did the Cronos Australia share price fire up?

Investors have been scrambling to buy the company's shares over the last two trading sessions thanks to a bullish broker note out of Bell Potter.

According to the note, the broker has initiated coverage on the company with a buy rating and 60 cents price target.

Based on the current Cronos Australia share price, this implies further potential upside of 9.1% for investors.

What did the broker say?

Bell Potter likes the company due to its leadership position in medicinal cannabis distribution. It explained:

Cronos Australia is a medicinal cannabis company that is the market leader in distribution to pharmacies and provides patient consulting services through its clinic business. The key driver for the impressive growth in the past 24 months has been the CanView platform which provides the widest range of medicinal cannabis products compared to competitors (Anspec, Health House).

The current system provides access to patients, doctors and pharmacists. The transition to CanView 2.0 streamlines the consultation and prescription process.

In addition, the broker highlights that Cronos Australia is a profitable, dividend-paying cannabis share. The only one of its kind in Australia. Furthermore, it feels its valuation is fair and its growth outlook is strong. The broker concludes:

We initiate coverage on Cronos with a Buy recommendation. We expect the momentum observed in FY22 to continue into FY23 and translate into strong revenue and earnings growth. Cronos is currently the only profitable dividend paying medicinal cannabis company on the ASX and the valuation does not appear demanding relative to the expected growth.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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