Why This Stock Could Be a Better Bargain Than Aurora Cannabis (TSX:ACB)

Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) may have fallen significantly in value this year, but that still doesn’t make the stock a cheap buy.

| More on:
Female scientist in a hemp field checking plants and flowers, alternative herbal medicine concept

Image source: Getty Images

Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) has taken a beating over the past 12 months, losing more than 40% of its value during that time. You have to go back around two years for the last time that the stock traded this low.

And yet, a great deal has changed since then and the company has grown a great deal. Not only does Aurora have a presence in many countries worldwide, but it’s also generated more than $168 million in sales over the past four quarters.

The cannabis company has come a long way, and with the launch of the cannabis 2.0 market right around the corner, the next 12 months could continue to build on its impressive growth.

Unfortunately, it’s the company’s lack of profitability has been weighing on investors, with losses totalling $211 million over the past four quarters sticking out like a sore thumb for many potential buyers. Coupled with that and a lack of cash flow garnering more of the spotlight lately, it’s no wonder the stock been beaten up so badly.

Smaller cannabis stock could generate better returns

As badly as Aurora has performed over the past year and as cheap as the stock may seem, trading at 20 times its sales, it may not be the cheapest buy for cannabis investors today. Namaste Technologies Inc (TSXV:N) is at a market cap of around $130 million and is still a relatively smaller player on the cannabis stage.

With a price-to-sales ratio of just seven, investors are paying even less of a premium to own Namaste. While it definitely has less brand recognition than Aurora, it still has a lot of potential to rise in value, perhaps even more.

One of the benefits of investing in a smaller stock is that there’s a lot more upside for investors to benefit from. Entering the week trading at just $0.40 at writing, it wouldn’t take a lot for Namaste to double or even triple in value, and it could still be a cheap stock to own.

Similar to Aurora, Namaste has also struggled with profitability, albeit its losses have not been early as significant. During the first six months of the fiscal year, Namaste accumulated $19 million in losses.

While it’s still an issue, without the breadth of operations that Aurora has, there’s much more room for Namaste to be able to control its costs.

Significant growth potential for CannMart

The stock could be poised to generate some good growth over the years through its website, CannMart, which provides cannabis consumers options to purchase medical marijuana products and accessories online.

In September, the company announced that it would be adding hemp-based skin care products as well. With the growing popularity of CBD wellness products, it’s a terrific opportunity to take advantage of what’s becoming the next big health craze.

Namaste has also recently received its first order from a government agency, when the BC Liquor Distribution Branch ordered pre-rolled cannabis on the CannMart site.

As Namaste builds up its reputation for quality cannabis, there will be ample room for the company to grow its sales. Like  Aurora, CannMart could also see some explosive sales from the 2.0 market, as in October, it received approval to offer cannabis oil concentrates on its website, which will enable it to sell even more products and reach more consumers.

With plenty of growth in the works, Namaste could benefit from significant success from the growing popularity of CannMart, which could send the stock soaring over the next 12 months.

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 David Jagielski has no position in any of the stocks mentioned. 

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Coworkers standing near a wall
Cannabis Stocks

Why Is Everyone Talking About Canopy Growth Stock?

Canopy Growth stock (TSX:WEED) saw shares surge in the last two weeks for a variety of reasons investors can dig…

Read more »

Pot stocks are a riskier investment
Stocks for Beginners

Why Shares of Cannabis Stocks Are Rising This Week

Cannabis stocks received a boost this week as the White House urged the drug enforcement administration to reschedule the drug.

Read more »

A person holds a small glass jar of marijuana.
Stocks for Beginners

Why Canopy Growth Stock Jumped 16% on Wednesday

Canopy Growth stock (TSX:WEED) is up 16% on Wednesday, adding to a surge of 60% growth in the last week…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Is the Worst Over for Canopy Growth Stock?

Down 99% from all-time highs Canopy Growth stock has burnt investor wealth and remains a high-risk investment.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Cannabis stocks have fallen.
Cannabis Stocks

2 Best Marijuana Stocks to Buy This Month

Marijuana stocks in the U.S. such as Green Thumb and Curaleaf can help you deliver outsized gains to investors in…

Read more »