Auxly Cannabis posted it’s Q4 results last Friday and the stock immediately dropped almost 12% in one day. Auxly posted a net loss of $67M for the year. A few takeaways from the earnings release was that operating expenses almost doubled from the previous year and other expenses (mostly share related expenses) almost quadrupled. The fact that expenses are rapidly rising and revenue is not catching up could be a concern for investors.
One of the main questions surrounding Auxly is whether it’s a good buy or not after it’s latest earnings report. It will all depend on whether or not the company can keep its promise of a state-of-the-art greenhouse facility in 2019, with expected supply of over 100,000 kg of cannabis in 2020. If the company is able to finish the facility and ramp up it’s production of cannabis, XLY will have a much better chance of increasing its revenue and market share.
Taking a quick look at ratio analysis for the company vs industry standards is really a mixed bag. One of the more promising ratios for Auxly is price-to-book at just 1.33 vs industry average of 68. The price-to-book ratio compares a company’s market value to its book value. Generally, the lower the ratio, the better but it all depends on the industry. With such a low price-to-book ratio, the ‘hype’ factor for Auxly is not as significant as many other pot stocks as investors are paying a premium vs it’s true book value.
Looking at some other key metrics, Auxly is lagging vs industry standards. It’s revenue/share is just 0.02 vs 5.36 and it’s total debt to equity is 25% vs 15% which is the industry average. The fact that the company only has 0.02 revenue per share could be a sign that it’s issuing too many shares and its core revenues from operations are lagging. The company will really have to watch its expenses and debt load in 2019 if the revenues do not catch up in a timely manner.