Canopy Growth Corporation’s (TSE:WEED): Canopy Growth Corporation, together with its subsidiaries, engages in engages in production, distribution, and sale of cannabis in Canada. With the latest financial year loss of -CA$685.4m and a trailing-twelve month of -CA$1.9b, the CA$8.5b market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is WEED’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for WEED’s growth and when analysts expect the company to become profitable.
See our latest analysis for Canopy Growth
WEED is bordering on breakeven, according to the 21 Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of CA$904m in 2023. Therefore, WEED is expected to breakeven roughly 4 years from now. In order to meet this breakeven date, I calculated the rate at which WEED must grow year-on-year. It turns out an average annual growth rate of 92% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
I’m not going to go through company-specific developments for WEED given that this is a high-level summary, however, bear in mind that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that WEED has managed its capital prudently, with debt making up 11% of equity. This means that WEED has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of WEED which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at WEED, take a look at WEED’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:
- Historical Track Record: What has WEED’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Canopy Growth’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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