The Canadian marijuana stocks we’ve weeded out have low debt to 2020 EBITDA ratios relative to their peers
SmallCapPower | August 12, 2019: The debt/EBITDA is a solvency ratio that measures the amount of income a company generates that it can use to pay down its debt before accounting for interest, taxes, depreciation, and amortization expenses. In essence, a company with a lower debt/EBITDA is more capable of paying off its debts. Today we have identified four Canadian marijuana stocks that have >$100M in debt with a low debt/EBITDA ratio relative to peers.
*Share prices as at close Wednesday, August 7, 2019, data obtained from S&P Capital IQ
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Aphria Inc. (TSX:APHA) – $9.13
Cannabis
Aphria produces and sells medical and adult-use, cannabis-derived extracts in Canada. The Company has a 1,100,000 sq. ft Leamington greenhouse facility that yields 100,000 kg per year. On August 1, Aphria Inc reported its results for the fourth quarter and fiscal year ended May 31, 2019. These results featured net revenue of $128.6M in the fourth quarter, an increase of 75% from the prior quarter. Notable, the Company more than doubled its kilograms sold from the previous quarter, selling 5,574kgs of cannabis relative to 2,637kgs in the previous quarter. APHA also posted a net income of $15.8M and adjusted EBITDA of $0.2M in the fourth quarter, an increase of 114.6% and 100.8%, respectively, from the previous quarter. Visit Aphria’s corporate website for more information.
- Market Cap: $2.3B
- YTD Return: 13.7%
- 90 Day Average Trading Volume: 2,290,000
- Debt to EBITDA: 6.6x
Aurora Cannabis Inc. (TSX:ACB) – $8.81
Cannabis
Aurora Cannabis is a vertically-integrated and horizontally-diversified cannabis company based in Edmonton, Alberta, which currently has a funded capacity that exceeds 625,000kg per year. The Company has sales operations in 25 countries across five continents. As of now, the Company has 18 strategic acquisitions, 15 global production facilities with 3 EU GMP certified, 40 clinical studies running or completed and over 77,000 medical patients served. On July 18, 2019, the Company announced that it was selected by the Italian government to be its public tender to supply medical cannabis in Italy. With the contract, Aurora will supply a minimum of 400kg of medical cannabis over the two-year contract. On July 15, 2019, Aurora announced that it received Health Canada licenses for outdoor cultivation in Quebec and British Columbia. Visit Aurora’s corporate website for more information.
- Market Cap: $8.9B
- YTD Return: 24.2%
- 90 Day Average Trading Volume: 4,630,000
- Debt to EBITDA: 7.7x
Auxly Cannabis Group Inc. (TSXV:XLY) – $1.05
Cannabis
Auxly Cannabis Group is a vertically-integrated cannabis company with diverse international operations. Initially, the Company was set up as an investment company, called Cannabis Wheaton Income Corp., which sought to finance cannabis producers across Canada in exchange for streaming agreements. Over the past two years, Auxly has progressively developed its strategy from a streaming/royalty business model to a vertically-integrated cannabis business. The Company has an international footprint along with assets and operations throughout the cannabis value chain, which include production, extraction, processing, development, and retail. On July 25, 2019, Auxly Cannabis Group announced that Imperial Brands PLC will invest ~$123M in Auxly by way of a convertible debenture and grant Auxly global licenses to Imperial Brands’ vaping technology. This partnership should accelerate Auxly’s business plan of focusing on the development of science-backed and innovative derivative products. Visit Auxly’s corporate website for more information.
- Market Cap: $637M
- YTD Return: 9.4%
- 90 Day Average Trading Volume: 870,000
- Debt to EBITDA: 1.5x
Zenabis Global Inc. (TSX:ZENA) – $1.45
Cannabis
Zenabis was formed in January 2019, after a reverse-takeover of Bevo Agro Inc by Sun Pharm Investments Ltd took place. Zenabis is a licensed cannabis cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis owns four facilities intended for the cultivation of cannabis: Zenabis Atholville, Zenabis Stellarton, Zenabis Delta, and Zenabis Langley. On July 22, Zenabis Global announced that it has entered into an agreement with Starseed Medicinal Inc, whereby Starseed will advance $10M to Zenabis in September in exchange for Zenabis supplying dried cannabis flower and trim.
- Market Cap: $294.8M
- YTD Return: -75.8%
- 90 Day Average Trading Volume: 550,000
- Debt to EBITDA: 2.2x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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