Challenges in the marijuana industry are nothing new; profitability, in particular, has always been an issue for the Canadian pot companies. Their U.S. counterparts, on the other hand, have managed to generate profits. Ups and downs in the Canadian cannabis market — regulatory delays, fewer legal stores than expected, and a thriving black market — have weighed on profits…
Ontario-based Aphria (NASDAQ:APHA), however, is bucking the trend with a track record of consistent profitability over the past five consecutive quarters. So what is Aphria doing right? Here are three reasons that it is not too late to buy this stock.
1. Aphria’s revenue numbers are outstanding
Aphria cultivates and sells medical and recreational cannabis products, with a compelling product portfolio that includes brands like its namesake Aphria, Broken Coast, Solei, RIFF, and Good Supply.
In the cannabis space, Aphria has an upper hand in sales, with fiscal 2020 revenue coming in at $543.3 million Canadian dollars, a year-over-year increase of 129%. Comparatively, Canopy Growth (NYSE:CGC) — which boasts a market cap of $6.1 billion, almost 4 times Aphria’s $1.3 billion — reported revenue growth of 76%, to CA$399 million, for the same period.
Meanwhile, Aurora Cannabis (NYSE:ACB) reported net revenue growth of 16%, to CA$75.5 million, for the third quarter of 2020 from the prior-year quarter, while Cronos Group‘s (NASDAQ:CRON) second-quarter net revenue came in 29% higher than the year-ago quarter at CA$9.9 million. Both companies, which have market caps between $1 billion and $2 billion, are not even close yet to pulling off what Aphria has already achieved for the full year.
2. It has a track record of consistent profitability
Strength in Aphria’s medical and adult-use market has helped it reach higher revenue and profits. In its recent fourth quarter, ended May 31, Aphria reported consolidated adjusted EBITDA (earnings before income, tax, depreciation, and amortization) of CA$8.6 million. That’s a stunning 49% increase from CA$5.7 million in the year-ago quarter. (Positive EBITDA gives a sense of how well a company is handling its operating expenses.) Meanwhile, Aurora and Canopy have yet to achieve profitability.
Shares of Aphria have declined 12.4% so far this year, a smaller loss than Aurora’s fall of 63.2% and Canopy’s fall of 22%. The industry benchmark, the Horizons Marijuana Life Sciences ETF, has declined by 25.3% in the same period.
Aphria’s net revenue was up 18% from the year-ago quarter to CA$152 million, with CA$65.4 million coming from cannabis products and CA$99.1 million from distribution revenue (from its German-based subsidiary CC Pharma and other distribution companies), less CA$12.3 million in excise taxes. Medical cannabis accounted for…
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