Avoid Aurora Cannabis Stock As Marijuana Legalization Approaches…
With new cases of the coronavirus spiking in the US and worldwide.
With the already historic unemployment levels and job losses in recent months.
And with many Blue-Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.
There are few safe places to invest today. And this number grows smaller every day this crisis lasts.
The key to continue compounding your investments and build wealth is to keep investing well over time.
Most people think the number one way to do that is to invest in assets that will grow your capital.
And this is a huge part of things.
But another huge part of this is also losing as little capital as possible.
The fewer investment losses you have the more capital you keep. And the more capital you keep the faster you can invest well to grow your wealth.
In recent articles I’ve shown you several stocks to avoid investing in.
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Today I want to begin helping you figure out whether you should buy cannabis stocks in your retirement portfolio by telling you why to Avoid Aurora Cannabis Stock As Marijuana Legalization Approaches…
Aurora Cannabis (ACB) sells medicinal and recreational cannabis mainly in Canada even though it has operations and agreements in more than 20 countries.
Its based in Edmonton Alberta Canada. It has a $2.2 billion market cap. And it’s a stock you need to avoid.
Normally in these articles I talk about things like dividends, profits, cash flow, debt levels and balance sheet strength, and valuation.
But frankly Aurora doesn’t pass any of the thresholds I normally look for when telling you about a great investment.
It doesn’t pay a dividend.
Its unprofitable and burning through a ton of cash. Since becoming a publicly traded company its never been profitable on an operating income, net income, or free cash flow basis.
On an operating income basis, I look for a company to produce 10% operating margins on a consistent basis… Since IPOing in July 2014 its average yearly operating profit margin is negative 162.4%.
And on an FCF/Sales basis I look for anything above 5% on a consistent basis… Its average yearly FCF/Sales margin is negative 338.2%.
Not only does Aurora not reach my minimum thresholds for profits… Its massively unprofitable.
And just to stay alive its been issuing a ton of shares. Which makes the proportion of shares you own worth less and less over time.
Its debt levels are okay… But its valuation is absurdly high due to the unprofitability… Combined with people continuing to buy its shares.
So far in the first few weeks of 2021 its shares are up 26.5%… Mainly due to the Democrats taking control of most of the US government.
Which should lead to marijuana being decriminalized or legalized at the federal level sooner rather than later.
Does this massive upcoming change to US laws mean you should buy Aurora even though its numbers and metrics are terrible?
No. You should continue avoiding Aurora at all costs.
Legalization or decriminalization in the US is coming… But Aurora is in such bad shape I don’t know if it will survive long enough to take advantage of this.
And for this reason – and the others above – I recommend you avoid Aurora at all costs.
Why am I writing about this stock if it doesn’t even come close to a buy when considering any of my criteria?
Because if you haven’t heard about Aurora yet, you will in the coming weeks as the talk about marijuana legalization or decriminalization heats up. And I want to tell you which cannabis stocks to avoid as this approaches.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.