Article

CANADA CANNABIS INVESTMENTS

November 9, 2018

 

With marijuana use legal in  Canada on the 17th of October, recreational cannabis public companies are under the microscope by investors, regulators and anyone curious about the "weed."

 

Our article is not designed to offer investment advice or represents an offer to buy or sell cannabis stocks, and merely a means to track what’s happening in Canada and whether or not such events and circumstances may have a bearing on the markets in the U.S.A.

 

Next week, four significant Canada focused public cannabis companies are to report earnings and issue other reports, especially post-legalization commentaries ---  Aurora Cannabis Inc., Tilray Inc Cronos Group Inc., and Canopy Growth Corp.

 

Today’s profile is  AURORA CANNABIS INC.   (ACB) $7.19.

ACB plans to report earnings and issue commentary on Monday. 

 

ACB produces and distributes medical cannabis products in Canada and internationally. It is vertically integrated and horizontally diversified across various segments of the cannabis value chain, from facility engineering and design to cannabis breeding, genetics research, production, derivatives, high value-add product development, home cultivation, wholesale, and retail distribution.

 

With a market canalization of $6.86 billion and a debt to equity of 13. ACB is valued too high for what the business is worth. The “enterprise value” of $7.44 billion appears overstated with the forward earnings, and leveraged cash flow suggests ACB would need to increase years sales by a factor of 5 times to show a profit. That event is not possible in the next seven years since ACB would require a capital infusion of $1.1 billion. Whether available by further stock sales or loans, the number is higher than the intrinsic value of the company.  With 960 million shares outstanding, book value of $2.06 per shares and $152 million in debt, ACB overvalued. 

 

As the numbers indicate, Aurora Cannabis Inc.  represents a business profile that appears faulted. 

 

Valuation Measures                                                         

Market Cap  - 6.86B

Enterprise Value - 7.44B

Trailing P/E -  63.19

Forward P/E  - N/A

PEG Ratio (5 yr expected)  - N/A

Price/Sales (ttm) - 165.29

Price/Book (mrq) - 3.46

Enterprise Value/Revenue  - 179.41

Enterprise Value/EBITDA  -145.95

 

Profitability

Profit Margin

130.33%

Operating Margin (ttm)

-145.13%

 

Management Effectiveness

Return on Assets (ttm)

-4.48%

Return on Equity (ttm)

7.77%

 

Income Statement

Revenue (ttm)

41.49M

Revenue Per Share (ttm)

0.09

Quarterly Revenue Growth (yoy)

222.60%

Gross Profit (ttm)

43.52M

EBITDA

-51M

Net Income Avi to Common (ttm)

54.08M

Diluted EPS (ttm)

0.11

Quarterly Earnings Growth (yoy)

N/A

 

Balance Sheet

Total Cash (mrq)

111.54M

Total Cash Per Share (mrq)

0.12

Total Debt (mrq)

152.76M

Total Debt/Equity (mrq)

13.00

Current Ratio (mrq)

2.92

Book Value Per Share (mrq)

2.06

 

Cash Flow Statement

Operating Cash Flow (ttm)

-61.39M

Levered Free Cash Flow (ttm)

-215.48M

52-Week Change

87.13%

S&P500 52-Week Change

8.60%

52 Week High

42,500.00

52 Week Low

4.06

50-Day Moving Average

7.11

200-Day Moving Average

7.11

 

Share Statistics

Avg Vol (3 month)

21.28M

Avg Vol (10 day)

18.36M

Shares Outstanding

960.96M

Float

921.5M

% Held by Insiders

3.48%

% Held by Institutions

5.05%

 

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