5 Canadian cannabis stocks to buy this fall

Highlights 

• One company mentioned here acquired two companies in its latest quarter.
• One of the cannabis companies below sold 11,346 kgs of cannabis in its latest quarter.
• One firm achieved carbon neutrality in September 2021 by offsetting 25,965 tonnes of carbon in addition to ocean-bound plastic equivalent to 3.55 million plastic bottles.

 

Tags, TSX: ACB, TSX: WEED, TSX: HEXO, TSXV: HITI

Many market analysts and advocacy groups expect a change in regulation related to the sale of pot-infused beverages. In early 2020, when cannabis-based beverages were first sold in the market, many leading cannabis companies could attract new consumers by launching innovative cannabis beverages.

A restriction on the purchase of six-packs of cannabis beverages laid forward by the Cannabis Council of Canada is believed to have hurt the revenue of these cannabis-producing companies.

Cannabis-producing companies rely upon the sale of cannabis products and cannabis beverages for growth.

The S&P/TSX Capped Health Care Index, which comprises some of these cannabis companies, posted a year-to-date (YTD) return of 0.42 per cent.

Let us consider some of the Canadian cannabis stocks to look at.

1. Aurora Cannabis Inc (TSX: ACB)

The drug manufacturing company cultivates and also sells cannabis, including both medicinal and recreational. Medicinal cannabis is sold and exported to over 20 countries, and Aurora Cannabis is headquartered in Canada.

The cannabis producing company held a market cap of C$ 1.6 billion and posted a price-to-book (P/B) ratio of 0.23 on September 28.

In the fourth quarter of fiscal 2021, Aurora Cannabis posted a total cannabis revenue of C$ 54.8 million, a decline of 19 per cent  Year-over-Year (YoY). However, total medical cannabis revenue increased by nine per cent YoY in the same quarter.

The company sold 11,346 kgs of cannabis during the quarter, down from 16,748 kgs in Q4 FY20.

The one-year stock return of Aurora Cannabis was 19 per cent. The company's stock price closed at C$ 8.08 apiece on September 27 that traded nearly 64 per cent above its 52-week low of C$ 4.93 (October 28, 2020).

2. Canopy Growth Corporation (TSX: WEED, NASDAQ: CGC)

The diversified cannabis company ventured into the health and wellness division in Canada, the US, and Europe. The medical cannabis division of Canopy Growth is a market leader in Germany and Canada. Some of the innovative products of the company are softgel capsules, infused beverages, etc.

The market cap of the cannabis company was C$ 7.31 billion and 393.18 million outstanding shares. Moreover, it held a P/B ratio of 1.76 on September 28.

Canopy Growth posted net revenue of C$ 136.2 million in Q1 FY22, up by 23 per cent YoY. Its gross margin was 20 per cent, and net earnings were C$ 390 million in Q1 FY22.

During the quarter, Canopy Growth acquired Supreme Cannabis and Ace Valley, as per the latest report. 

On September 27, the stock price of Canopy Growth closed at C$ 18.59 that traded eight per cent above its 52-week low price. The stock price dipped by close to two per cent over the past year. However, it increased by nearly six per cent on a week-to-date (WTD) basis.

Also Read: Top 10 cannabis stocks to buy in 2021

3. Tilray Inc (TSX:TLRY)

Tilray operates as a consumer-packaged goods and cannabis manufacturing company. The company runs its operation in Europe, Canada, Australia, and the US.

Tilray produces and supplies cannabis to over 20 brands in more than 20 countries. Some of the products are hemp-based food, alcoholic beverages, etc. As per the latest quarterly report, Tilray partnered with ROSE LifeScience to boost cannabis distribution in Quebec.

Tilray posted net revenue of US$ 142.2 million in Q4 FY21, an increase of 25 per cent YoY. Its adjusted EBITDA was US$ 12.3 million, and free cash flow was US$ 3.3 million in the same quarter.

The drug manufacturing company posted a P/B ratio of 8.8 and held a market cap of C$ 7.11 billion on September 28.

On a quarter-to-date (QTD) basis, the stock price of Tilray was down 31 per cent. The stocks reached their 52-week high of C$ 27.88 on June 9 and at the market close on September 27, stocks were priced at C$ 15.39.

Also Read: 5 best TSX Cannabis stocks under C$25 to buy

4. HEXO Corp. (TSX: HEXO, NYSE: HEXO)

The cannabis producing company has partnered with Fortune 500 companies leveraging cannabinoid isolation technology and the distribution network. HEXO serves the global cannabis market by providing innovative cannabis-derived products.

HEXO achieved carbon neutrality in September 2021 by offsetting carbon emissions levels of 2020. The company offset 25,965 tonnes of carbon in addition to ocean-bound plastic equivalent to 3.55 million plastic bottles, as per the management’s commentary.

The total revenue posted by HEXO was C$ 22.6 million in Q3 FY21, an increase of two per cent YoY. Its total net loss was C$ 20.7 million in Q3 FY21.

The management of HEXO commented that it intends to acquire 48North and Redecan to become the leading producer of recreational cannabis.

The company posted a debt-to-equity (D/E) ratio of 0.21, a P/B ratio of 1.36. The market share of the company was C$ 533.64 million (at the time of writing). 

Over the past year, the stock price of HEXO dipped by nearly 26 per cent. It reached its 52-week high of C$ 14 on February 10, and closed at C$ 2.58 on September 27.

5. High Tide Inc. (TSXV: HITI)

The Alberta-based cannabis producing company is engaged in the wholesale distribution of smoking and cannabis-based products. High Tide got listed on the Toronto Stock Exchange Venture after the successful launch of its initial public offering (IPO) on December 17, 2018.

The stock price surged by 148 per cent in the last nine months and rocketed by close to 231 per cent over the past year. It closed at C$ 8.19 on September 27. Its YTD was 114.11 per cent.

With the launch of new cannabis retail stores in Kanata and Gloucester, High Tide increased its presence in Ottawa, as per its latest report.

On the valuation front, the company's D/E ratio and P/B ratio were 3.58 and 3.01, respectively.

Bottom line

Many analysts believe that changes in the regulation on the purchase and sale of cannabis can impact cannabis-producing companies.