The Canadian cannabis stocks on our list have significantly lower Debt/Equity Ratios than the 40% industry average
SmallCapPower | October 10, 2018: Leaders in the cannabis industry have spent the past year making strategic acquisitions and expanding their cultivation facilities in efforts to ramp up cannabis production. The capital required to complete these investments was raised in one of two ways: by issuing shares (equity) or by taking on loans (debt). In Canada, raising capital through debt can be advantageous as interest fees are expensed and reduce the amount the company pays in income tax. However, taking on too much debt can make a company a risky investment. Should a debt-bearing company’s cash flows drop significantly, there is a risk of defaulting on monthly interest expenses. That being said, we have weeded out three Canadian cannabis stocks with Debt/Equity ratios significantly less than the industry average of 40%.
The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $6.37
Green Organic Dutchman Holdings is a Canada-based cannabis producer with operations in Ontario and Quebec. The Company’s facilities are under construction but have already received the ACMPR cultivation and sales licenses. TGOD aims to be the lowest cost producer in Canada by accessing the lowest power rates in Ontario and Quebec. The combined production capacity of the two facilities totaling 970,000 sq. ft. is expected to produce 116,000 kg of cannabis flower. On August 21, 2018, the Company announced the acquisition of privately-held HemPoland, the leading European manufacture of organic CBD oil. The Green Organic Dutchman has financed its acquisitions through equity and currently holds no long-term debt.
- Market Cap: $1,621.0 Million
- Total Debt (Last Quarter): None
- Total Debt to Equity Percent (Last Quarter): 0%
- 1-Month Total Return: -10.5%
Namaste Technologies Inc. (TSXV:N) – $2.09
Namaste Technologies is an international cannabis eCommerce company operating across 20 countries, which utilizes machine learning to provide patients access to medical cannabis products. In 2018, the Company plans on establishing Namaste MD, a secure telemedicine portal designed to connect doctors with patients in need of medicinal cannabis. The platform will provide patients with an online portal to receive doctor consultations and receive medical marijuana recommendations with a delivery option. The Company’s wholly-owned subsidiary, CannMart, has received its ACMPR medical cannabis ‘sales only’ license from Health Canada, giving the Company access to sell medical cannabis online within Canada. On September 13, the Company signed a Binding Terms Sheet to acquire AF Trading Ltd, a 30,000 sq. ft. distribution facility in the UK, for US$5 Million – paid 50% in stock and 50% in cash.
- Market Cap: $601.7 Million
- Total Debt (Last Quarter): $0.1 Million
- Total Debt to Equity Percent (Last Quarter): 0.08%
- 1-Month Total Return: -34.7%
Aphria Inc. (TSX:APH) – $16.31
Aphria is Canada’s third-largest cannabis producer by licensed capacity. The Company’s Leamington greenhouse facility provides them with the opportunity to be a scalable, low-cost producer of medical marijuana. By January 2019, Aphria expects to increase its total licensed greenhouse growing space to 1,000,000 sq. ft., increasing its annual production capacity from 9,000 kilograms to 100,000 kilograms. The Company currently has 44,000 sq. ft. of production space. On September 27, Aphria closed the acquisition of LATAM Holdings Inc., a Latin American cannabis producer, by the issuance of ~15.7 million common shares.
- Market Cap: $4,068.6 Million
- Total Debt (Last Quarter): $31.1 Million
- Total Debt to Equity Percent (Last Quarter): 2.65%
- 1-Month Total Return: -24.8%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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