SNDL (SNDL -1.88%) has undergone a name change (it was previously knows as Sundial Growers) and multiple acquisitions over the past year and a half. Unable to rely on its own organic growth, the cannabis producer has extended its reach into the alcohol industry, and it now also operates retail pot shops across Canada.

The company recently posted its quarterly earnings numbers, which showed a mammoth increase in sales. Has SNDL turned a corner and become a better buy, or is this still too risky of a stock for investors to be buying?

Sales from acquisitions accounted for 95% of revenue

SNDL's revenue in the second quarter totaled 223.7 million Canadian dollars for the period ending June 30. That represents a year-over-year growth rate of 2,344%. It's an eyepopping amount, the kind of growth rate I haven't seen since the early stages of legalization in Canada, when new recreational sales were making all pot stocks look like growth machines.

However, these numbers are a bit misleading. The vast majority of the company's revenue this past quarter was due to its recent acquisitions. SNDL closed on its acquisition of Alcanna on March 31 and this marked the first full quarter that the alcohol business was included in the cannabis company's results. Sales from liquor totaled CA$148.6 million and accounted for two-thirds of SNDL's top line. Cannabis retail sales were due to Nova Cannabis (acquired through the Alcanna deal) and Spiritleaf, which SNDL acquired in July 2021. Revenue from that segment totaled CA$63.5 million, or 28% of sales.

That leaves just CA$11.6 million from cannabis cultivation and production (5% of sales), the business that SNDL had before these deals. A year ago, revenue from that segment totaled just CA$9.2 million. While the company did experience a significant boost in sales in Q2, it was because these acquisitions weren't contributing to SNDL's business in the prior-year period.

SNDL remains unprofitable, and it's still burning through cash

What should be important to investors is how well SNDL is integrating these businesses and how its cash and bottom line look. Unfortunately, those figures aren't looking great. In Q2, the company incurred a net loss of CA$74 million, which is 41% higher than the CA$52.3 million loss it posted in the prior-year period.

From a cash perspective, the business is still burning money, recording an outflow of CA$17.9 million from its operating activities over the past three months. That's an improvement from the CA$70.4 million cash burn it reported a year ago, but the prior-year period numbers also look worse because of nearly CA$70 million worth of additions to marketable securities; that's not an outflow that should concern investors, as marketable securities are fairly liquid assets.

Even though the company should find room to cut out some redundancies from these acquisitions and improve its cost structure and cash flow, SNDL has a lot of work to do, and investors shouldn't assume that more deals will make the business better.

The business is different, but it's not better

SNDL has certainly changed its business, but this is no turnaround, and it's not a better investment. Adding complexity and businesses that may not be all that complementary to one another (e.g. alcohol and cannabis) isn't something that may add value in the long run. Companies often deploy spinoffs for the sake of focusing on core competencies and being leaner and more efficient. SNDL is doing the opposite of that, all for the sake of adding to its top line. This week, the company announced yet another all-stock deal to buy cannabis company Valens.

Investors should avoid SNDL. The company is going down a dangerous path that looks to be a growth-at-all-costs strategy, which is likely to lead to more dilution, and the business won't necessarily be any better off in the long run.