3 Reasons Aurora Cannabis (TSX:ACB) Q3 Results Weren’t All That Impressive

Aurora Cannabis Inc  (TSX:ACB)(NYSE:ACB) hit $65 million in net revenue in its most recent quarter. It was quadruple the $16 million in sales that the company did a year ago, but that doesn’t tell the whole story. Here are my three takeaways from the company’s Q3 results.

Sales were up, but still not where they were supposed to be

Investors might recall that before Q2 was released, the company issued a warning saying that it wasn’t going to come close to hitting sales targets that analysts were expecting. Initial projections saw Aurora reaching up to $67 million in sales; instead the numbers came in at just $54 million. Even the current Q3 numbers still wouldn’t top estimates originally set out for Q2.

And so while it may be tempting to get excited to see the top line soar from a year ago, investors shouldn’t forget the context and that revenues haven’t been as strong as expected. However, it’s not exclusively an Aurora problem as we’ve seen other companies miss expectations as well.

Fair value gains of $16 million weren’t enough to put the company in the black

In Q3, Aurora recorded a net loss of more than $160 million, eight times the loss it incurred a year ago. What’s remarkable is that even with the benefit of fair value gains padding its gross profit and pushing it to $53 million, that still wasn’t enough to offset all the cost increases.

Other expense items of $92 million certainly didn’t help, and pushed the company deeper into the red, but Aurora still incurred a sizeable loss from operations, totalling $78 million and more than double last year’s loss of $31 million.

General and administrative expenses were up $41 million, while share-based compensation rose by $23 million. In the earnings release, CEO Terry Booth said, “We are laser focused on building a long-term sustainable business.” A sustainable business to me is one that makes money and can keep itself afloat without having to rely on debt or equity to fund it. Today, Aurora is nowhere near that. While some investors might be content with sales growth, over the long term, it’s going to be harder to ignore the losses.

Cash has been burning at a rapid pace

Further proof of unsustainability is that over the past nine months, Aurora has used $188 million on just its operating activities, compared to $37 million during the same period a year ago. It has also been spending more on capital as purchases of plant, property and equipment totalled $247 million in the first three quarters of the year, which is more than double last year’s amount.

Bottom line

Aurora showed strong sales growth in Q3, as many other marijuana companies did. However, there are some significant issues on its financials that would make me hesitant to ever considering investing in the stock. The danger of an unprofitable company and one that’s not able to generate cash is that it’ll lead to more share issues, which will result in dilution for shareholders and impact overall returns.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

More reading

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

Source: The Fool
3 Reasons Aurora Cannabis (TSX:ACB) Q3 Results Weren’t All That Impressive
The Fool

The Motley Fool
Contributor at mjcanada.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related News