Canopy Growth Corporation’s (TSX:WEED): Canopy Growth Corporation, through its subsidiaries, produces and sells medical marijuana in Canada. With the latest financial year loss of -CA$7.52M and a trailing-twelve month of -CA$20.80M, the CA$5.48B market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is WEED’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for WEED, its year of breakeven and its implied growth rate.
According to the industry analysts covering WEED, breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of CA$36.50M in 2020. WEED is therefore projected to breakeven around 2 years from today. How fast will WEED have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 75.15% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, WEED may become profitable much later than analysts predict.
Underlying developments driving WEED’s growth isn’t the focus of this broad overview, but, bear in mind that by and large pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I’d like to point out is that WEED has managed its capital prudently, with debt making up 0.86% of equity. This means that WEED has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of WEED to cover in one brief article, but the key fundamentals for the company can all be found in one place – WEED’s company page on Simply Wall St. I’ve also put together a list of important factors you should further examine:
Valuation: What is WEED worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether WEED is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Canopy Growth’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
credit:simplywall.st