Aurora Cannabis (ACB -1.12%) may be one of the largest marijuana stocks you can invest in, but that doesn't mean it's one of the best. While the company has been continuing to grow its revenues at an impressive pace, rising expenses have prevented the company from getting to breakeven. In its most recent fiscal year, Aurora's net losses totaled $298 million Canadian dollars. The biggest knock on Aurora isn't how it has done in the past, however, but how challenging the next year may be.
The company doesn't have a big advantage over its rivals, and at a market cap of close to $4.5 billion, it's also one of the most expensive pot stocks that investors can buy today. And when you consider that the company may be disadvantaged without a big company from another industry to help with its growth and cash flow issues, Aurora could be in big trouble if its share price continues to fall, as that will only make it more difficult to raise money. That's not something investors want to worry about, as nothing can cripple a company's stock the way a cash shortage can.
That's why the two stocks listed below could be much better options for investors today.
Aphria (APHA) has also been seeing significant sales growth, but unlike Aurora it hasn't been piling on the losses. Its numbers have been a lot better, with Aphria generating a net income of CA$15.8 million last quarter. Aphria also posted a profit in three of the past four quarters overall, a rarity for pot stocks. One of the reasons Aphria may be a more cost-efficient operation is that it simply doesn't have as many locations over the world. While both companies have a presence on five continents, Aphria is in just 10 countries compared to a whopping 25 for Aurora.
Growth investors may think that's an advantage for Aurora, but the reality is that markets outside of North America are going to take years to develop. In the short term it could just lead to a whole lot of cash burn, which is what Aurora has been faced with. Simplicity beats market penetration at this stage, and that's where Aphria might be better positioned for success and profitability next year.
2. Green Thumb Industries
Green Thumb Industries (GTBIF 0.11%) doesn't have a big global reach, but with operations in the U.S., it also doesn't need to. That simplifies the company's operations and prevents it from having to worry about managing operations and relationships that are oceans away. Instead it can focus on a very strong U.S. market that was worth $11.3 billion last year and that's expected to grow at a rate of 14.5% annually.
The company has already accumulated more than $110 million in just the past four quarters, and although it hasn't had success in turning a profit, the company's financials are still in better shape than Aurora's, with Green Thumb recording a net loss of less than $10 million in three of the past four quarters. The key to the company's growth thus far has been the success of its retail strategy, with its Rise and Essence brands of stores doing very well, as retail revenues grew 189% last quarter.
With 95 retail locations across the country and more still to be opened, Green Thumb is able to take advantage of growth opportunities that Aurora doesn't have access to, and won't until marijuana is legalized federally.
Takeaways for investors
Aurora Cannabis is an expensive stock to own today, even with its share price continuing to fall in value. If you're looking for better value and a cannabis company with better odds of posting a profit, then Aphria could be a much safer buy. And if it's growth that you're after, it's hard to argue with Green Thumb's sales numbers and potential, especially with the company recently making an acquisition of Fiorello Pharmaceuticals, which will give it a strong presence in New York.