Aurora or Aphria, better buy, better partner for Diageo? Better Buy: Aphria Inc vs. Aurora Cannabis Inc.
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Valuation
Aphria's market cap of around $3.2 billion is much smaller than Aurora's market cap of $5.9 billion. Based on each stock's price-to-sales ratio, Aphria is more attractively valued than Aurora is. However, both stocks appear to be absurdly expensive when looking at any commonly used valuation metric.
Another way of comparing these two stocks is the "bang for the buck" approach -- calculate how much you pay for each kilogram of production capacity. At Aphria's current market cap, investors would pay roughly $12,549 per kilogram of projected 2019 capacity. For Aurora, the figure is $10,439 per kilogram of projected 2019 capacity using the current market cap.
However, it's better to use enterprise value rather than market cap with this approach. Enterprise value factors in cash, short-term investments, and debt. Using enterprise values for each stock, you'd pay about the same amount per kilogram for Aphria as we saw in the previous figure. However, because Aurora's enterprise value of $3.76 billion is a lot lower than its market cap, you'd pay around $6,597 per kilogram of projected 2019 capacity for the stock.
Better buy
Both Aphria and Aurora Cannabis should be big winners in the Canadian recreational cannabis market. I think Aurora's greater production capacity could give it an advantage, though. Aurora also appears to be in a better position for the global medical cannabis market. The company's Denmark facility and rapidly growing sales in Germany give it an edge.
There's a case for both stocks as to which has the more attractive valuation. The truth, of course, is that neither Aphria nor Aurora Cannabis is valued attractively. However, I think Aurora clearly wins using the "bang for the buck" approach.
Putting all of this together, my view is that Aurora Cannabis is the better stock right now, despite its underperformance so far this year compared to Aphria. However, the dynamics could change significantly if Diageo or another big company picks Aphria instead of Aurora. The better buy of today might not be the better buy of tomorrow in the ever-changing cannabis industry.
https://www.nasdaq.com/article/better-buy-aphria-inc-vs-aurora-cannabis-inc-cm1019907