Is Aphria (TSX:APHA) Stock the Most-Watched Cannabis Investment Right Now?

All eyes are on Aphria Inc. (TSX:APHA)(NYSE:APHA) at the moment, and its stats are looking good.

| More on:
Man considering whether to sell or buy

Image source: Getty Images.

With leadership changes and a quarterly earnings report that shows considerable year-on-year growth, it’s hard to go a day without seeing headlines that pertain to legal marijuana heavyweight, Aphria (TSX:APHA)(NYSE:APHA). One of the most popular weed stocks on the TSX index, Aphria has become a key stock to watch when gauging the performance of this fascinating new Canadian industry.

Aphria has outperformed the Canadian pharma crowd

Comparing year-on-year earnings growth within markets is a good way to get a handle on a stock’s profitability. Aphria’s one-year past earnings growth of 94% versus the Canadian pharma average of 72% should be vindication enough for shareholders that they were backing the right horse. That figure also beats a five-year average past earnings growth of 89.6%, and shows that Canadian pot stocks can pull it out of the bag when it comes to profitability. The other thing to bear in mind is that pharma is a key defensive area, and to outperform in this space is no mean feat.

Overall, Aphria stock is shaking out as a moderate to strong buy right now: it’s got surprisingly good value stats, some decent quality indicators, and a fair amount of momentum. Let’s break that down now and see how that buy signal is supported by the data.

While not an undervalued stock compared to the rest of the TSX index, Aphria stock has some interesting ratios at the moment: consider a P/E of 44.7 times earnings (a little high, but par for the course for an outperforming legal weed ticker), an acceptable PEG of 0.8 times growth, and a fairly modest P/B of 1.4 times book. There’s no dividend on offer as yet, but who knows where the legal recreational and medical cannabis industry will end up?

A growth stock with impressive momentum stats

Meanwhile, quality is indicated by a ROE of 2% (low, but at least positive), EPS of $0.19, and very tasty 54.7% expected annual growth in earnings. Sure, there are better quality stocks on the TSX index, but that projected jump in earnings should interest growth investors, while a very low comparative debt level of 3.8% of net worth should appease investors with a lower appetite for risk.

Aphria stock gained 15.99% in the last five days (not bad for a post-Christmas market) while its share price is overvalued by more than double its future cash flow value. A beta of 2.65 indicates high volatility. This means good things for the momentum investment crowd and shows that legal marijuana stocks can continue to reward buyers with upside.

The bottom line

Compare the above stats with those of Canopy Growth (TSX:WEED)(NYSE:CGC). You’ll see that Aphria stock comes out on top in terms of value against a P/B of 7.1 times book. Indeed, in terms of valuation against growth, Aphria stock is the better buy. However, Canopy Growth’s 76.4% expected annual growth in earnings is a little higher, and with share price up 39.48% in the last five days, Canopy Growth beats Aphria on its core momentum stats, with a 2.94 per-market beta showing extreme volatility compared to the market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Stocks for Beginners

eat food
Stocks for Beginners

Hungry? These 3 Food Stocks Are Hard to Ignore

Food stocks are some of the best long-term investments on the market. Here are three options that are hard to…

Read more »

A worker uses a laptop inside a restaurant.
Stocks for Beginners

Stubborn Interest Rates: 2 TSX Stocks That Can Play Along (and Even Win)

Higher interest rates are actually good for these stocks. They trade at good valuations and provide nice dividends.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Stocks for Beginners

Buying These 2 Stocks Is a Good Way to Hedge Against a Falling Market

Investors looking to hedge against a stock downturn should consider these two stocks as viable long-term picks.

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

There are some great Canadian stocks on sale right now. Here's a duo of companies I'm buying that you may…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Stocks for Beginners

Has ATZ Stock Bottomed Out?

Has ATZ stock finally bottomed out after losing nearly 10% of its value in 2022? Let’s find out.

Read more »

Stocks for Beginners

4 Top Value Stocks to Buy in February 2023

Not only are all these value stocks worth considering, each is growing significantly on the TSX today!

Read more »

Couple relaxing on a beach in front of a sunset
Stocks for Beginners

3 Stocks That Could Help You Retire a Millionaire

Looking for some stocks that can help you retire rich? Here are three buy-and-forget options that will do the trick.

Read more »

Target. Stand out from the crowd
Stocks for Beginners

3 Must-Buy TSX Stocks for Anyone New to Investing

Are you new to investing? These three TSX stocks for income, value, and growth are must-buys for any Canadian investor…

Read more »