Aphria Inc (TSX:APHA) (NYSE:APHA) has long been regarded as one of the more promising companies in the cannabis sector. That being said, like many other cannabis stocks, it has lost as much as 85% since January of 2018. However, it should be noted that while many companies are suffering from steep losses, Aphria actually delivered a profit in two out of the past three quarters.
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The profits were generated through fair value adjustments; however, it should be noted that even with such adjustments, profits are rare in the industry. Aphria has performed admirably in recent times.
In the fiscal second quarter for 2020, which ended in November 2019, the company generated revenues of CA$120.6 million. That reflects a rise of as much as 550% year on year. In this regard, it is also important to point out that in the past six months, Aphria generated earnings of C$8.5 million. Another important factor in the company’s future growth is its German subsidiary CC Pharma, which is a major player in the medical marijuana industry. Other distribution subsidiaries include ABP and FL Group. In Q2 2020, the company generated 72% of its entire revenues or $86.4 million from these businesses.
The other major factor why the stock could prove to be a good long term pick is the company’s strong cash position of $500 million. Aphria management has said that it has enough cash to take care of its activities over the next year. The company burns through only $60 million per quarter, and hence, the cash balance should see Aphria through over the next 18 months or so with ease. The continued underperformance of the cannabis space could also prove to be a positive since Aphria would then be able to acquire some companies on the cheap. It is also determined to grow its footprint at a global level, and Aphria is doing so through strategic acquisitions.
