Stocks part of the cannabis market may provide investors an opportunity to derive market-beating gains in the upcoming decade. The marijuana sector is poised to expand rapidly especially if cannabis is legalized at the federal level in the U.S.
Keeping these factors in mind, let's see which marijuana stock between Aurora Cannabis (NYSE: ACB) and GrowGeneration (NASDAQ: GRWG) should be part of your portfolio right now.
One of the largest cannabis companies operating in Canada, Aurora Cannabis is valued at a market cap of $1.14 billion. Despite its billion-dollar valuation, ACB stock is trading 96% below record highs and has burnt significant investor wealth in the last three years.
The cannabis giant has been wrestling with widening losses, high inventory levels, a decline in market share, and billion-dollar write-downs which have sent its stock price spiraling downwards.
In order to stem the cash burn, Aurora Cannabis announced it will focus on the high-margin medical marijuana segment as well as disclosed a business transformation plan to lower its cost structure.
In the fiscal first quarter of fiscal 2022 that ended in September, Aurora Cannabis reported net sales of $60.1 million, a decline of 11% year over year. The company's management now expects to report an adjusted EBITDA profit within the next five quarters. But Aurora Cannabis has consistently failed to deliver on its lofty promises in the past, and the company's recently provided outlook should not sway investors.
In Q1 of fiscal 2022, Aurora Cannabis improved its gross margin by just 1%, but it reported an adjusted EBITDA loss of $12.1 million, compared to its prior-year loss of $19.7 million.
However, there are a few things going right for the company. It's a market leader in Canada's medical marijuana segment, where Aurora's sales rose by 23% year over year to $41 million in Q1. The company's international sales more than doubled as well in the quarter ended in September.
GrowGeneration is an ancillary marijuana company valued at a market cap of $665 million. GRWG stock went public in late 2016 and has returned 383% to investors. However, its also down 83% from all-time highs making it the perfect contrarian bet at current prices.
GrowGeneration owns and operates retail hydroponic and organic gardening stores in the U.S. It ended Q3 with a chain of 62 stores and reported revenue of $332 million in the first nine months of 2021. While top-line more than doubled, its net profit in this period surged by 340% to $17 million.
The company now aims to increase the number of stores to 100 by end of 2023 which should translate to sales growth. Analysts expect GrowGeneration to increase sales by 126% to $438 million in 2021 and by 21% to $529.7 million in 2022. Comparatively, its adjusted earnings is forecast to touch $0.30 per share in 2022, up from $0.11 per share in 2020.
It's quite easy to pick a winner between Aurora Cannabis and GrowGeneration. While Aurora Cannabis remains unprofitable and grappling with tepid sales, GrowGeneration is widening its bottom-line and continues to trade at an attractive multiple, making the latter a winning bet for cannabis investors.
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