Aphria stock has underperformed the broader cannabis sector over the past one quarter amid weakness in the marijuana sector.
Let's review key developments from Aphria Inc (TSX:APHA) (NYSE:APHA).
Notable Developments
The marijuana industry has grown significantly over the past year or so, and some stocks have managed to gain in tandem during this period. That being said, some stocks have stayed under the radar for a variety of reasons, and one of those is Aphria.
The stock has underperformed recently, and it is not hard to see why. The cannabis producer has struggled to control its costs, and after the publication of its results in its latest quarter, the stock price nosedived. However, it is also important to note that Aphria stock is now one of the cheapest in the industry, and there are certain factors that need to be looked into.
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Key Analysis
At this point in time, Aphria stock has a price to sales ratio that has been pegged at 17. Although it is true that the figure might be high for most industries, it is not so when it comes to the marijuana industry, which is known for high growth. As a matter of fact, there are stocks that have a price to sales ratio of as much as 50.
Although its cost continued to spiral out of control, Aphria grew its sales by as much as 600% in the most recent quarter. The sales figures were significantly boosted through CC Pharma and ABP, two of its recent acquisitions. It is worthwhile to note that those acquisitions had been criticized by short-sellers in the past but that now the company stands vindicated.
At the end of the day, an investor needs to figure out whether Aphria stock is a value pick or not. The company’s growth in the latest quarter has been stupendous and a cause for optimism. However, it is tough to imagine that growth of 600% is going to carry on for a long time. Hence, experts suggest that it is perhaps better to wait for a clearer path to profitability for APHA, before jumping on Aphria stock.
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