The Canadian cannabis stocks we’ve identified have the highest Selling, General and Administrative (SG&A) as a percentage of revenue
SmallCapPower | September 4, 2019: Large Canadian cultivators have had a tough time ramping up sales over the last couple of years. Many companies do not even cover Selling, General and Administrative (SG&A) expenses from revenue generation. As a result, many are continuing to burn cash. For reference, SG&A is the dollar value of costs that is indirectly related to the goods and services sold. It mainly incorporates corporate expenses such as sales, marketing, advertising, customer service, human resources, accounting and finance. Today we have weeded out five Canadian cannabis stocks that have the highest SG&A as a percentage of revenue as of the last reported quarter.
*Share prices as at close August 29, 2019, data obtained from S&P Capital IQ
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Cronos Group Inc. (TSX: CRON) – $14.66
Cannabis
Cronos is a globally-diversified and vertically-integrated cannabis company that currently has operations in five continents. The Company has two wholly-owned Canadian licensed producers: 1) Peace Naturals Project Inc., a global health and wellness platform; and 2) Original BC Ltd., a recreational adult-use Canadian licensed producer that is located in Okanagan Valley, BC. Cronos’ business strategy is to focus on building an international iconic brand portfolio in addition to developing its intellectual property. On August 8, 2019, the Company released Q2/19 financial results, which showed net revenue of $10.2M, an increase of 58% QoQ from $6.5M in Q1/19. This was driven mainly by the increased sales of CBD oil. Visit Cronos Group’s corporate website for more information.
- Market Cap: $4,928 Million
- YTD Return: 2%
- General and Administrative Expenses: $15.2 Million
- Sales and Marketing Expenses: $5.4 Million
- Gross Revenue: $10.8 Million
- SG&A Percentage of Revenue: 190.7%
Aurora Cannabis Inc. (TSX: ACB) – $7.38
Cannabis
Aurora Cannabis is a vertically-integrated and horizontally-diversified cannabis company that is located in Edmonton, Alberta. Currently, the Company has a funded capacity that exceeds 625,000kg per year. Aurora Cannabis has sales operations in 25 countries across five continents. The Company has 15 global production facilities with 3 EU GMP certified, 40 clinical studies running or completed and over 77,000 medical patients served. On August 18, 2019, Aurora announced the completion of its acquisition of Hempco Food and Fiber Inc. for ~$63.4M. This provides the Company with access to low-cost, high-volume, raw hemp material for the extraction of CBD and other cannabinoids. Visit the Company’s corporate website for more information.
- Market Cap: $7,528 Million
- YTD Return: 8%
- General and Administrative Expenses: $50.8 Million
- Sales and Marketing Expenses: $16.3 Million
- Gross Revenue: $72.2 Million
- SG&A Percentage of Revenue: 92.9%
HEXO Corp. (TSX: HEXO) – $5.36
Cannabis
HEXO is a consumer-packaged goods and cannabis experience company. It currently operates 2.4M sq.ft of facilities in Ontario and Quebec. The Company utilizes a hub-and-spoke business strategy that involves partnerships with Fortune 500 companies. Through this strategy, HEXO brings its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory capability to established companies, leveraging its distribution networks and capacity. On June 12, 2019, HEXO reported Q3/19 financial results, which showed revenue of $15.9M, a QoQ decrease of 1.5%. Additionally, the Company reported having cash and cash equivalents and short-term investments of $17.6M and capital of $219.1M. Visit the Company’s corporate website for more information.
- Market Cap: $1,351.3 Million
- YTD Return: 12%
- General and Administrative Expenses: $10.5 Million
- Sales and Marketing Expenses: $5.1 Million
- Gross Revenue: $15.9 Million
- SG&A Percentage of Revenue: 98.1%
Aphria Inc. (TSX: APHA) – $8.52
Cannabis
Aphria produces and sells medical and recreational cannabis-derived extracts in Canada. The Company currently has a 1.1M 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% QoQ. Notably, the Company more than doubled its kilograms sold from the previous quarter, selling 5,574 kg of cannabis relative to 2,637 kg in the previous quarter. On May 21, 2019, the Company announced its German subsidiary Aphria Deutschland GmbH had received a fifth lot for the cultivation of medical cannabis in Germany. Visit the Company’s corporate website for more information.
- Market Cap: $2,180 Million
- YTD Return: 9%
- General and Administrative Expenses: $69.8 Million
- Sales and Marketing Expenses: $28.0 Million
- Gross Revenue: $86.3 Million
- SG&A Percentage of Revenue: 113.0%
Canopy Growth Corp. (TSX: WEED) – $31.97
Cannabis
Canopy Growth is the largest cannabis company listed by market cap on the TSX and NYSE. Currently, the Company has the largest licensed production platform in Canada, with over 600,000 sq.ft of production space. Additionally, Canopy Growth has secured the necessary agreement to export medicinal cannabis to Australia, Brazil, and Germany. Canopy announced on August 20, 2019, that it had received a license from Health Canada for its KeyLeaf Life Sciences facility in Saskatoon, Saskatchewan. It is expected that the facility will be ready for use in the Fall of 2019 and should have the capacity to extract about 5,000 kg of hemp or cannabis biomass per day. Visit the Company’s corporate website for more information.
- Market Cap: $11,121.3 Million
- YTD Return: -14%
- General and Administrative Expenses: $62.3 Million
- Sales and Marketing Expenses: $45.1 Million
- Gross Revenue: $103.4 Million
- SG&A Percentage of Revenue: 103.9%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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