I recently wrote about the earnings potential of Aphria (APHA) for its fiscal second quarter, as well as the stock's prospects. Last week, the company announced its fiscal first-quarter 2020 results. The earnings mark the second consecutive quarter of profitability, along with continued growth of its revenue streams on an annual basis.
To me, Aphria is the stock to own in this industry. The shares were battered in the past by turmoil over executive activity (executives who have left their respective roles) and now offer a good deal based on the company's actual assets.
Last year, shareholders were hit with a speed bump as the company slipped to net losses of 108.2 million Canadian dollars in the fiscal third quarter due to spending money on acquisitions and expansion. Now it would seem that Aphria is back to its old self, delivering profits that many marijuana stocks can only dream about.
What happened in the last quarter
Aphria reported that revenue increased 849% year over year to CA$126.1 million, while revenues declined 2% on a quarter-to-quarter basis. It's worth noting the breakdown of these revenues, as Aphria has a considerable medical marijuana business that goes hand in hand with its growth into recreational markets. Adult-use cannabis revenues increased 8% to CA$20 million in the fiscal first quarter. Sequentially, that's an 8% increase from the fiscal fourth quarter.
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Operating income shifted to just under CA$4 million versus a loss of CA$10.35 million the year prior, while lower nonoperating income resulted in lower income before taxes of CA$19 million. Overall, net income of CA$16.44 million marks a year-over-year decrease from last year's CA$21.18 million. Nonetheless, it is still profits. The earnings break down to CA$0.07 per diluted share. The earnings mark a 22% decrease year over year.
Distribution remains the biggest piece of the business. That means Aphria is reliant on distributing to medical providers for most of its cash. Overall distribution revenues were CA$95.33 million. Honestly, a reliance on distribution doesn't bother me. As long as the company can create strong revenue streams, it doesn't matter where the earnings come from.
Guidance
Looking forward, Aphria reaffirmed its previous guidance of CA$650 million to CA$700 million for fiscal 2020. That would mark a huge expansion from fiscal 2019's revenues of CA$237 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is forecasted at CA$88 million to CA$95 million. That's a giant improvement over fiscal 2019's adjusted EBITDA of negative CA$27.7 million.
Bullish about this stock
I think we could see the start of a new long-term bull case for Aphria. The shares now are reasonably valued relative to the company's books. The company is well-capitalized with more than CA$464 million in cash. You can get your hands on a stake in Aphria for very close to the actual business value. I think Aphria is a marijuana stock you can take a chance on.
