Aphria's shares fell hard after its first-quarter earnings report on Oct. 15. Coronavirus-related challenges weighed on Aphria's revenue growth and led the previously profitable company to post a $5.1 million loss during the quarter.
Yet as my Foolish colleague Zhiyuan Sun noted, the sell-off was overdone. Aphria limped into November with its shares trading at a bargain, with a price-to-sales ratio of around 3 and a price-to-book around 1 -- and investors quickly pounced on the deal.
Cannabis stocks jumped in early November after Vice President-elect Kamala Harris promised that the Biden administration would decriminalize marijuana at the federal level. Decriminalization could make it easier for marijuana-related businesses to obtain financing and other services from banks, which has long been a challenge for the cannabis industry. Aphria's gains were also aided by voters in five states -- New Jersey, Arizona, Mississippi, Montana, and South Dakota -- approving ballot initiatives to legalize marijuana.
Additionally, investors cheered Aphria's acquisition of SweetWater Brewing Company, one of the largest independent craft brewers in the U.S. SweetWater makes 420, the popular hemp-flavored beer brand, and the brewer's retail relationships should help Aphria expand its U.S. distribution network.
Even after last month's surge, more gains could lie ahead for Aphria's investors. As one of the more financially sound marijuana companies -- Aphria has generated positive adjusted EBITDA (earnings before interest, taxes, depreciation, and appreciation) for six consecutive quarters -- the marijuana producer's stock remains one of the best ways to invest in the long-term growth of the global cannabis market.