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CRONOS GROUP INC. ... lost in the sauce

November 13, 2018

 

CANADA CANNABIS INVESTMENT SERIES – part three.

 

As announced last 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’ public company review is Cronos Group Inc.

 

Cronos Group Inc., formerly known as PharmaCan Capital Corp., is a principal investment firm. The firm seeks to invest in companies either licensed or actively seeking a license, to produce medical marijuana according to Canada's Marihuana for Medical Purposes Regulations. Cronos Group Inc. was incorporated in January 2013 and is based in Toronto, Canada with an additional office in Toronto, Canada.

 

Cronos Group Inc.  (CRON)  $8.12

 

earnings report:  CRON reports Q3 revs of CAD 3.76 mln vs. $1.314 mln last year and two-analyst estimate of CAD 3.56 mln, Q3 GAAP loss per share of CAD 0.04 vs. CAD 0.01 last year and two-analyst estimate of - CAD 0.02

 

overview:  CROM reported that kilograms of cannabis sold increased 213% in the third quarter from 164 kilograms in the third quarter of 2017 to 514 kilograms in the third quarter of 2018. The main drivers associated with the increase in revenues and the increase in kilograms sold are increased production capacity and increased volumes sold through the domestic medical and international channels, as well as initial shipments into the domestic adult-use recreational market.

The Company continues to see strong growth in cannabis oil sales, which represented 29% of total revenue in the third quarter of 2018.

 

commentary: CROM has a $1.45 billion valuation with revenue of only $6.96 million.  With a negative cash flow, CROM is a risk that should be avoided. As for profits with its current business model – it will never happen.

 

Valuation Measures

Market Cap (intraday)     1.48B

Enterprise Value     1.45B

Trailing P/E     825.00

Forward P/E     N/A

PEG Ratio (5 yr expected)     N/A

Price/Sales (ttm)    212.95

Price/Book (mrq)    8.54

Enterprise Value/Revenue     208.42

Enterprise Value/EBITDA     -643,606.50

Financial Highlights

Currency in CAD.

Fiscal Year

Fiscal Year Ends     Dec 30, 2017

Most Recent Quarter (mrq)    Jun 29, 2018

Profitability

Profit Margin     30.59%

Operating Margin (ttm)    -16.78%

Management Effectiveness

Return on Assets (ttm)    -0.67%

Return on Equity (ttm)    2.04%

Income Statement

Revenue (ttm)    6.96M

Revenue Per Share (ttm)    0.05

Quarterly Revenue Growth (yoy)    427.80%

Gross Profit (ttm)    7.23M

EBITDA     -2.25k

Net Income Avi to Common (ttm)    2.13M

Diluted EPS (ttm)    0.01

Quarterly Earnings Growth (yoy)    315.50%

Balance Sheet

Total Cash (mrq)    67.36M

Total Cash Per Share (mrq)    0.38

Total Debt (mrq)    4.18M

Total Debt/Equity (mrq)    2.45

Current Ratio (mrq)    52.75

Book Value Per Share (mrq)    0.97

Cash Flow Statement

Operating Cash Flow (ttm)    -15.73M

Levered Free Cash Flow (ttm)    -72.56M

Trading Information

Stock Price History

Beta (3Y Monthly)     4.04

52-Week Change  %

S&P500 52-Week Change     5.47%

52 Week High     15.30

52 Week Low     5.12

50-Day Moving Average     9.49

200-Day Moving Average     8.01

Share Statistics

Avg Vol (3 month)     21.62M

Avg Vol (10 day)    11.38M

Shares Outstanding     177.15M

Float     150.95M

% Held by Insiders     6.12%

% Held by Institutions     12.44%

Shares Short (Oct 30, 2018)     30.05M

Short Ratio (Oct 30, 2018)    2.27

Short % of Float (Oct 30, 2018)     N/A

Short % of Shares Outstanding (Oct 30, 2018)     16.97%

Shares Short (prior month Sep 27, 2018)     22.51M

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