BLACKROCK Municipal Income TRUST V.BFK.P

HEXO To Beat Canopy Growth To Profitability

[quinlash]

To understand this post you need to first understand what EBIDTA is:
 
Definition of EBIDTA

- EBITDA is a widely used metric of corporate profitability

- EBITDA can be used to compare companies against each other and industry averages.

- Also, EBITDA is a good measure of core profit trends because it eliminates some extraneous factors and allows a more "apples-to-apples" comparisons.
EBITDA can be used as a shortcut to estimate the cash flow available to pay the debt of long-term assets.
 
Link to Reference
https://www.investopedia.com/terms/e/ebitda.asp
 
How is EBIDTA used to evaluate new companies / emerging markets
https://www.inc.com/ed-powers/5-key-numbers-a-buyout-firm-uses-to-value-your-company.html
 
In HEXO’s 2020 Q3 QTR Report (the most recent) the CEO indicated that they expect to become EBIDTA positive in Calendar Year 2020, or at latest, Jan 2021.  This brings the date in closer than the earlier estimate stated in the Q2 report.
 
How does HEXO Compare to Canopy Growth for becoming EBIDTA Positive?

Taken from most recent Canopy Growth Report:

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The company also withdrew its target of becoming EBITDA positive by the end of fiscal 2022

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Link to Reference:
https://business.financialpost.com/cannabis/cannabis-business/canopy-growth-shares-plunge-after-loss-bigger-than-expected
 

How does becoming EBIDTA Positive Affect Share Price ?

As a company progresses toward profitability the Share Price can be expected to rise.  before becoming cash flow positive and, ironically, as they are now progressing towards becoming cash flow positive, they are trading towards their 1-year lows.
 
Link to Reference
https://finance.zacks.com/profits-reflect-stock-prices-8263.html
 
Most Cannabis producers in Canada have yet to begin operating at a profit.  This includes HEXO but also includes Aurora Cannabis and Canopy Growth.  All three of these companies hit their record highs well before they began bringing in any revenue numbers worth noting.
 
In Aurora’s last report they produced a “surprise” increase in sales amounting to apx 18% increase in revenue
 
Aurora reported Q3 net revenue came in at $78.4 million, excluding provisions of $2.9 million, up 18% quarter over quarter. The company’s revenue figure easily surpassed the average analyst estimate, which projected Aurora would report revenue of $66.7 million for the third quarter.

Link to Reference
https://www.thecannabisinvestor.ca/after-presumed-dead-heres-why-aurora-cannabis-stock-skyrocketed-over-120-in-2-days/
 
Canopy Growth actually reported a decrease in sales and a loss of market share

Link to Reference:
https://www.bnnbloomberg.ca/cannabis-canada-big-loss-lost-market-share-refocused-operations-mark-canopy-growth-s-q4-1.1443179


HEXO, compared to Aurora and Canopy reported the following:

- Increase in sales amounting to 30% Increase

- Increase in Market Share in Quebec

- A move from top 5 Canadian Supplier of Cannabis to Top 4 with objective of becoming a top-2 Supplier

- The details of the above can be viewed in the most recent HEXO QTR report transcript.
 
Link to HEXO Transcripts
https://ca.wallmine.com/nyse/hexo/transcripts