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Why Canopy Growth (TSX:WEED) Stock Is Beating Aurora Cannabis (TSX:ACB)

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Last week, Canopy Growth Corp (TSX:WEED)(NYSE:CGC) went on an epic bull run, rising 14.95% in the span of just five days. This came after an earnings report that topped revenue expectations and showed diluted per-share losses getting smaller. While the quarter was hardly a stunning success, it beat investor expectations enough to send WEED shares soaring.

Around the same time, Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) delivered an earnings report of its own–this one disappointing by virtually every metric.

With revenue declines in every single business segment and a massive $1.3 billion net loss, it was not well received by the financial press. ACB still rose 5% last week, as the market had apparently been pricing the shares for even worse results.

Nevertheless, we’ve got Canopy decisively beating Aurora post-earnings, which begs the question, why? Just a few months ago, Canopy was making headlines for its own $1 billion plus losses and high-profile executive firings.

Now Aurora is in the exact same boat. To understand how this happened, we need to take a closer look at both companies’ recent earnings.

Better earnings results

Canopy’s Q3 earnings were better than Aurora’s by almost every metric. Canopy’s revenue grew in Q3, both year over year and sequentially. Aurora’s declined sequentially, with a 26% overall decline, which came from lower sales in every single business segment.

Additionally, Canopy’s loss got smaller on a diluted per share basis, while Aurora’s got larger. In Q3, Canopy lost $0.35 per diluted share, compared to $0.38 in the same quarter a year before. Aurora, on the other hand, lost $1.18 per share compared to $0.25 in the prior year quarter.

The biggest reason for Aurora’s massive loss was goodwill impairment. The company had a whopping $800 million impairment charge thrown at it, resulting in a huge hit to both the balance sheet and income statement.

This had no impact on cash flows, so the company’s reported $80 million adjusted EBITDA loss may be more instructive. Nevertheless, it was a big and very well publicized hit.

News coverage

Speaking of publicity, Aurora has been getting a great deal of it lately–most of it negative.

Last year, the company had its license to sell cannabis in Germany suspended. Shortly after that, it was reported that the company sold a cannabis facility for $17 million, losing money on the deal.

Finally, the company’s CEO Terry Booth stepped down. Taken together, these stories don’t paint a picture of a thriving company. Granted, Canopy was in a very similar boat around the middle of last year, and it bounced back, but it looks like Aurora’s woes have come at an inopportune time.

Foolish takeaway

Despite everything I’ve written about Canopy and Aurora in this article, I wouldn’t decisively recommend one stock over the other. As mentioned above, the difficulties Aurora is going through now are similar to ones Canopy went through last year.

It’s quite possible that Aurora will get over the slump it’s in now and come back bigger and better. For now, though, it’s undeniably falling behind its main rival.

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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 Andrew Button has no position in any of the stocks mentioned.

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