CannTrust stock has lost more than half of its market value since the beginning of July amid continuous news developments related to the company's latest scandal.
Let's analyze the fundamentals of CannTrust Holdings (TSX:TRST) (NYSE:CTST).
Business Analysis
The month of July has been disastrous for cannabis company CannTrust Holdings as it was handed a non-compliance report after having cultivated cannabis in five unlicensed rooms in its Pelham facility. However, things went from bad to worse quickly as it had to recall its products and also withhold cannabis that had been produced at the time for inspection. Recently, it emerged that the company’s top management had been aware of the operation all along and had, in fact, been part of the elaborate cover-up. While all this was going on, CannTrust stock dropped like a stone, and at one point, it had lost as much as 55%.
Eventually, the company had to take measures to calm the markets, and it did somewhat manage this. The Chief Executive Officer Peter Aceto was fired, while the company’s President Eric Paul was asked to step down. CannTrust stock price recovered soon after as the market believed that the company was trying to mend its ways.
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What's Left to Do?
Now, the question remains whether this is an opportunity for CannTrust stock while it trades at historic lows or whether it is more prudent to stay away before all this blows over. At the end of the day, there is a very real chance that CannTrust Holdings might see its license canceled by Health Canada once the investigations are finished.
However, it is also important to keep in mind that many companies in many other industries have had to deal with far worse and managed to turn around strongly. CannTrust has a strong business and is expected to break into the 100,000 kilos a year club soon. Since it is based in Ontario, it has access to cheap water and electricity as well, which has allowed it to bring down its production costs. So, if the company can manage to come out of this crisis, then there is no reason why it cannot recover and become an important player in the marijuana industry.
CannTrust stock has slumped over 80% from its 52-week high of $11.97.
Featured image: Canva
