Aphria Q1 Financial Results Show a ‘Model’ Marijuana Company

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Aphria Inc. (TSE:APH) shares have surged over 20% and this stock has the potential to deliver monster returns going forward as we near the marijuana legalization date

SmallCapPower | October 16, 2017: Aphria Inc. (TSX:APH), one of the Canada’s low cost marijuana producers, reported results for the first quarter ended August 31, 2017, on Friday. Revenues increased 7% to $6.1 million and grams sales increased by 15%, from 738.3 kgs to 852.0 kgs. Going with its competitive advantage of low-cost production, the Company further reduced its “all-in” cost for the quarter from $1.67 to $1.60, mainly due to completion of Part II expansion. We may see further reduction in this cost going forward as Aphria reaches the completion of Part III (May 2018) and Part IV (January 2019) expansion plans.

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As the legalization date is approaching, it is important for the marijuana producers to optimize the costs. Looking at the “all-in” costs reduction in the past two quarters, Aphria has positioned itself well in the industry with a profitable business model as compared with other players.

Lower costs helped Aphria post positive EBITDA for the eighth consecutive quarter. EBITDA came in at $1.5 million for the quarter, a 47% increase over the prior year. Net income also jumped to $15 million for the quarter, up from less than $1 million a year ago. Investors must not be lured by the tremendous net income jump as this came as a result of unrealized gains on its long-term investments, which totaled over $19 million. These unrealized gains can to turn into losses anytime, which would have an adverse effect on the net income.

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Aphria stock currently trades at high valuation of TTM Price-to-Sales ratio of 48.71x, common among other players. In the past month, Aphria shares have surged over 20% and this stock has the potential to deliver monster returns going forward as we near the marijuana legalization date in Canada.

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