The Canadian marijuana stocks on our list are industry leaders in converting their assets into profits
SmallCapPower | June 5, 2018: Today we have identified four Canadian marijuana stocks with high return on asset ratios (ROA). This is a useful measure of how effective companies are at using their assets to generate profits, or in other words, receiving the greatest return on their investment. ROA is calculated as net income divided by average total assets for the period. Many companies in the industry are not yet producing positive net income, and thus have negative ROA. Here we have weeded out the cannabis companies that are currently generating the most “bang for their buck.”
MedReleaf is a licensed producer of medical marijuana under the ACMPR, currently in the process of being acquired by Aurora Cannabis. With return on assets of 23%, it extracts the most income from its assets of all the companies in this list. MedReleaf produces 7,000 kg/year out of a 55,000 sq. ft. facility in Markham, Ontario. The Company has outlined its plans to expand to additional facilities in Bradford and Exeter. Post-expansion, its combined production capacity is estimated to be 140,000 kg/year. MedReleaf has previously announced a partnership with Shoppers Drug Mart to sell medical marijuana. The status of how the expansion project and partnership will be incorporated post-acquisition has not yet been announced.
- Market Cap: $2,494.9 Million
- Return on Assets FY/2017: 23%
- Pretax Return on Assets FY/2017: 33%
- YTD Total Return: 16%
CannTrust Holdings Inc. (TSX:TRST) – $8.28
CannTrust is a Canada-based licensed producer of medical cannabis. The Company’s products are sold online and delivered to registered patients. CannTrust’s original 60,000 square foot production facility located in Vaughan, Ontario uses hydroponic technology to produce at 3,600 kg annually. CannTrust has also set aside a 46-acre property, where it intends to build a 450,000 sq. ft. facility to increase growing capacity with an anticipated completion date in mid-2018. It has a return on assets of 14%.
- Market Cap: $774.7 Million
- Return on Assets FY/2017: 14%
- Pretax Return on Assets FY/2017: 14%
- YTD Total Return: -10%
Cronos Group owns and operates two licensed producers of medical marijuana in Canada: Peace Naturals (medical) and In The Zone (recreational). The Company also actively seeks investment opportunities in companies that are licensed under the ACMPR or that are actively seeking a license. In addition, Cronos plans to ramp up production at its Peace Naturals facility from the existing 5,000 kg to 40,000 kg before 2019. Of note, the Company formed a partnership with Israeli entity, Gan Shmuel, to set up a low-cost production facility in Israel. The proposed facility is expected to produce 24,000 kg/year. Cronos has a return on assets of 3%.
- Market Cap: $1,559.4 Million
- Return on Assets FY/2017: 3%
- Pretax Return on Assets FY/2017: 4%
- YTD Total Return: -9%
Aphria is a licensed producer and supplier of medical marijuana under the ACMPR. Its flagship greenhouse production facility is located on a 169-acre property in Leamington, Ontario. The Company currently produces 32,500 kg and plans to expand its production facility to add an additional 192,000 kg of capacity by early 2019. It has a return on assets of 2%.
- Market Cap: $2,475.3 Million
- Return on Assets FY/2017: 2%
- Pretax Return on Assets FY/2017: 2%
- YTD Total Return: -37%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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