Canopy Growth Corporation's (TSE:WEED): Canopy Growth Corporation, together with its subsidiaries, engages in engages in production, distribution, and sale of cannabis in Canada. With the latest financial year loss of -CA$685.4m and a trailing-twelve month of -CA$1.9b, the CA$11b market-cap amplifies its loss by moving further away from its breakeven target. As path to profitability is the topic on WEED’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for WEED, its year of breakeven and its implied growth rate.
According to the 20 industry analysts covering WEED, the consensus is breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of CA$904m in 2023. So, WEED is predicted to breakeven approximately 3 years from now. What rate will WEED have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 88%, which signals high confidence from analysts. If this rate turns out to be too aggressive, WEED may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of WEED’s upcoming projects, but, keep in mind that typically a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before I wrap up, there’s one aspect worth mentioning. WEED has managed its capital judiciously, with debt making up 11% of equity. This means that WEED has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
There are key fundamentals of WEED which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at WEED, take a look at WEED’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further examine:
Historical Track Record: What has WEED's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Canopy Growth’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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