Cannabis producer Sundial Growers (SNDL 3.65%) will report its third-quarter earnings on Nov. 11. It will be an important report for the company, as Sundial has undergone significant changes this year. Plus, investors will be looking for some progress on its financials, which have been underwhelming in recent periods.

But given how active Sundial has been in making moves this year, what can investors realistically expect from the report? Here's an overview of some of the items to watch for when Sundial posts earnings: 

Several people working in a greenhouse and wearing yellow slickers.

Image source: Getty Images.

A significant boost in revenue

One of Sundial Growers' major challenges has been growing its top line. Its Q2 revenue for the period ending June 30 totaled just 9.2 million Canadian dollars ($7.4 million) for a decline of 7% from the previous quarter. And that was also less than half of the CA$20.2 million ($16.3 million) it reported the previous year.

However, in Q3, it's likely to see those numbers jump, if for no other reason than on July 20 it officially closed the CA$131 million ($105.6 million) acquisition of cannabis retail company Inner Spirit. It won't be a full quarter of revenue as Sundial's period will cover July through to the end of September, so nearly three weeks of sales won't be included. But the increase could still be significant as the retailer generates a similar amount of revenue to Sundial, potentially doubling the pot producer's top line when contributing for a full quarter.

More expenses and lots of noise

But Sundial will also incur more expenses along with the additional revenue this quarter. Recent acquisitions often come with lots of inefficiencies and increased costs. So at least in the short term, there will be considerable noise on the company's financials from the Inner Spirit deal. In October, it also announced the acquisition of liquor store operator Alcanna (which has pot shops in its portfolio through a subsidiary). Although that was announced after the end of the quarter, Sundial will incur acquisition expenses related to that deal in Q3 as well.

For investors focused on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), the good news is that these acquisition-related expenses will likely be backed out of the earnings calculation. Although it is safe to assume Sundial will report an overall net loss on an accounting basis (last quarter's loss was CA$52.3 million, or $42 million), its adjusted EBITDA does have a chance of being positive. In Q2, it barely missed breakeven with an adjusted EBITDA loss of only CA$0.2 million ($.16 million).

Is Sundial a buy heading into earnings?

This is going to be a tough quarter for investors to dissect. While Sundial will definitely do better on the top line, the inclusion of an acquisition could make it more difficult to determine how well its core business did. But at the same time, Sundial's core business may no longer be the same after acquiring not one but two retail companies this year (the Alcanna deal won't be closed until at least next month).

That's a big part of the reason why holding off on buying shares of Sundial is the safest move right now. With so many moving parts to account for, investors should tread carefully with the stock. It also doesn't help that it is trading at a hefty 20 times revenue. Other Canadian pot producers, including OrganiGram and Aurora Cannabis, trade at multiples of just nine and six times revenue, respectively. 

Sundial is a risky buy given its high valuation. And even if its recent deals help improve its revenue, that still may not be enough of a reason to invest in the business just yet as its bottom line will need lots of work.