2019 was a highly disappointing year for cannabis stocks, but over the past few trading sessions, many of the stocks have rebounded. However, the same cannot be said about Aurora stock, which has continued to slide during the period. Aurora Cannabis (TSX:ACB) (NYSE:ACB) is one of the biggest cannabis companies in the world—so, what's going on?
Major Metrics
At its current stock price, Aurora Cannabis has a market capitalization of $2.35 billion, and over the course of the past four quarters, the Canadian cannabis producer has generated around $226 million in revenue. This indicates that at current valuations, Aurora stock is trading at about 10 times its revenue over the past year. That multiple is clearly better than some of the company’s peers.
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However, investors need to look beyond the top line if they are considering Aurora stock because doing so will allow investors to get a fuller picture of the considerable risks involved with the company.
The company has generated massive losses in recent times, and many analysts have raised questions about Aurora’s financial stability. Over the course of the past 12 months, Aurora Cannabis has suffered losses of as much as C$384 million, and during the same period, it reported that it had a negative cash flow of C$669 million. Those figures are unlikely to be palatable to most investors, and when one considers the fact that Aurora only has C$192 million, things look much worse.
Experts believe that the company’s cash reserves are not at a level that could support the sort of cash burn that it has indulged in. This is why some analysts believe Aurora Cannabis to be a high-risk stock, and that now is not the best time to move into Aurora stock.
What do you think?
Featured image: Canva
