Tilray (TLRY) was once one of the top pot stocks to invest in. Today, it's a bit unclear where the company stands amid its peers. The stock's down more than 40% this year -- well worse than the Horizons Marijuana Life Sciences ETF (HMLSF 0.51%) that's down just 16%. And while the company's still growing, it's hard for investors to ignore Tilray's mounting losses.
Let's take a look at the company's recent results, its level growth, and whether the stock is a buy at its current price.
Is the company's business in trouble?
A big concern for many cannabis investors right now is whether companies can get through the COVID-19 pandemic. One key consideration that should always come into play when making that assessment is cash flow.
Tilray released its first-quarter results on May 11. As of the end of Q1, the company reported cash and cash equivalents totaling $174 million during the quarter -- that's up from $96.8 million on Dec. 31. The British Columbia-based business has been raising funds to help improve its financial position. In the first three months of the year, Tilray was able to add $159.8 million in cash from its financing activities.
In the short term, the good news is that with Tilray burning through $54 million in cash to fund its operating activities in Q1, the cash it has on hand should suffice to get the company through at least a couple of quarters on its own.
Beyond that, however, there will be question marks surrounding cash that will likely arise once again. The company's own CEO, Brendan Kennedy, told BNN Bloomberg in May that even before COVID-19 he "wasn't sure anyone was going to be able to raise any money in this industry again," given the industry's struggles. Now, the situation may be even more challenging.
Becoming profitable is one way that Tilray can attract investors, but that could be a long shot given where the company is today. In Q1, Tilray incurred a net loss of $184.1 million. And while the company did incur impairment costs of $29.8 million, even without that, Tilray still would've reported an operating loss of more than $41.4 million.
With just $10.9 million in gross profit, the cannabis producer's just not getting enough from its top line to cover its expenses. General and administrative expenses of $17.8 million would've already been enough to put the company's results into the red, without even factoring in selling and marketing expenses and other operating costs incurred during the quarter.
Tilray's recorded a loss in each of its last 10 quarterly results, and there's little reason to expect that will change as the economy slows down due to the COVID-19 pandemic.
Is there enough growth to look past disappointing results?
If there's an attractive enough growth opportunity, investors can sometimes look past a company's current struggles. But it's not clear that is the case with Tilray. Although its sales in Q1 were more than double what they were a year ago, the company will be going up against stronger comparable numbers this year, which will make even achieving double-digit growth a challenge.
In Q1, Tilray's revenue of $52.1 million was up just 11% from the fourth quarter. And during its last four quarters, the company's top line has wavered between $52 million and $46 million. Given that the pandemic will limit the disposable income that consumers have this year, it's unlikely that Tilray will continue posting strong growth numbers in the quarters ahead.
Is the stock cheap enough to consider buying despite challenges?
In terms of its price-to-sales multiple, here's how Tilray compares against some of its main competitors in the industry:
While the stock's not as expensive as some of the more popular stocks out there, it's also not the cheapest, either. However, given the challenge the company's facing this year and its unimpressive results, it's hard to be bullish on the stock. It's likely that Tilray's stock falls even further this year, especially given its rate of cash burn and the possibility that it'll need to issue more shares in order to generate money to keep its operations going.
Even with the pot stock struggling this year and trading at a reduced price, Tilray's just not worth the risk.