The cannabis landscape has been sprouting new opportunities of late because of increasing legalization in the United States and the growing acceptance of marijuana’s medical and recreational uses. Although marijuana usage has yet to be made legal at the federal level, state legalization momentum remains strong as more governors take steps to end marijuana prohibition in their states…
However, the cannabis space is highly competitive and not all players are in a good shape financially. In fact, now that Mexico has passed a bill to legalize recreational pot use—making it one of the world’s largest cannabis markets—the business climate for Canadian and U.S. pot operators could become even more competitive.
Against such a backdrop, the stocks of cannabis companies Canopy Growth Corporation (CGC – Get Rating), Tilray Inc. (TLRY – Get Rating), Sundial Growers Inc. (SNDL – Get Rating) and OrganiGram Holdings Inc. (OGI – Get Rating), which are expensive, and the companies financially inadequate, should be avoided now.
Formerly known as Tweed Marijuana Inc., CGC is a world-leading diversified cannabis and cannabinoid-based consumer products company. The company operates through Cannabis, Hemp and Other Consumer Products, and Canopy Rivers segments. Its products include high-quality dried flower, oil, soft gel capsule, infused beverage, edible, and topical formats, as well as vaporizer devices by Canopy Growth and industry-leader Storz & Bickel.
In April, CGC entered a distribution agreement with Southern Glazer’s Wine & Spirits, the world’s pre-eminent distributor of beverage alcohol, for its U.S. portfolio of CBD-infused beverages. Southern Glazer’s established network should help CGC to sell its CBD beverage products to eminent retailers and consumers in the U.S. market.
CGC’s forward EV/Sales currently stands at 21.60x, 215.4% higher than the 6.85x industry average. The company’s 22.50x forward Price/Sales is 206.3% higher than the 7.35x industry average.
Although CGC’s revenue grew by 23% year-over-year to CAD$152.53 million in the third quarter ended December 31, it reported a CAD$829.3 million net loss. Also, it generated a CAD$553.61 million operating loss for this period. Its gross margin came in at 16%, representing a decline of 1,500 basis points over the period. The stock has declined 32.7% over the past three months.
CGC’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which translates to Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CGC is also rated an F in Value, Sentiment, and Quality. Within the F-rated Medical – Pharmaceuticals industry, it is ranked #216 of 232 stocks.
To see additional POWR Ratings for Growth, Momentum, and Stability for CGC, Click here.
Incorporated in 2018 and based in Canada, TLRY is involved in research, cultivation, processing and distribution of medical cannabis. It is the first GMP-certified medical cannabis producer to supply cannabis flower and extract products to patients, physicians, pharmacies, hospitals, governments and researchers on five continents.
This month, TLRY and Aphria Inc. closed their previously announced business combination to establish the leading cannabis-focused consumer packaged goods company with the largest global footprint in the cannabis industry.
The company’s forward EV/Sales currently stands at 11.29x, 64.9% higher than the 6.85x industry average. Its198.11x forward EV/EBITDA is 1,049.2% higher than the 17.24x industry average.
In its fiscal fourth quarter, ended December 31, TLRY reported…
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