The cannabis-focused biotechs, cannabis growers and companies in this article play supportive roles within the cannabis industry. When comparing weed stocks to invest in, we can evaluate grower against grower, developer against developer, biotech against biotech. But, what about grower against supplier? This article will compare one of the top growers, Aurora Cannabis (NASDAQOTH:ACBFF), to one of the top suppliers, The Scotts Miracle-Gro Company (NYSE:SMG).
The case for investing in marijuana stocks company Aurora Cannabis:
An argument for investing in Aurora Cannabis could be summed up in three basic points:
- The rapid, global expansion of the medical cannabis market.
- The anticipation of Canada’s launch of recreational marijuana sometime this year.
- Aurora Cannabis is strategically prepared to capitalize on each of the two above scenarios.
With its Canadian base, Aurora Cannabis can easily be discussed only in the context of the medical cannabis market in Canada. More countries worldwide are legalizing medical marijuana and the global market is steadily growing larger. Germany, for example, is among the largest global MMJ markets, where Aurora already has a subsidiary.
There is steady growth in global MMJ markets, and in Canada, a stage is set for the explosion of a recreational weed market. Initially, Canada’s government seemed to have set the target date for launch in July 2018, but, in the past month, that timeline was revised to a tentative September launch date. Whatever the case, Canada’s opening to recreational sales is coming soon, with projected annual sales of $5 billion or more.
Aurora Cannabis marijuana stocks, both globally and in Canada, look promising after examining the company’s sales of medical marijuana in the latest quarter.
The report showed Aurora Cannabis’ sales had more than tripled from the same period last year. The majority of these sales came from Canada, but, one-fifth of the company’s total revenue came from sales from its German subsidiary.
On the Canadian front, Aurora has been busy getting operations in place for the launch of recreational sales. An overview of the company’s activities these past months will show acquisitions made, facility expansions and an overall ramping up of production capacity. The company is set to produce 240,000 kg of cannabis annually, thanks to its current facilities.
Marijuana stocks company Aurora is expanding its Canadian footprint through a strategic partnership with a major player in the liquor industry.
Through its purchase of stakes in Liquor Stores N.A. Ltd., Aurora is laying further groundwork for retail sales, some of which will come through converting Liquor Store locations to marijuana retail stores. The company plans include construction of new marijuana retail stores.
The case for investing in marijuana stocks company Scotts Miracle-Gro:
Whereas Aurora Cannabis’ case could be summed in three points, the argument for investing in Scotts Miracle-Gro could be captured in one: among marijuana growers, it is the go-to supplier for many critical items.
Common investing sense tells us that demand for the products necessary for growing marijuana will soar in proportion to the growth of both medical and recreational cannabis industries worldwide. Since these industries are already experiencing rapid growth, with much more anticipated, it stands that demand for supplies will also experience rapid growth. This means demand for hydroponics, fertilizer and lighting systems which are essential for both large and small marijuana growers.
When it comes to suppliers, related marijuana stocks company Scotts Miracle-Gro has outpaced most of its competitors in the industry.
The company has bolstered its offerings of hydroponics and lighting systems through several acquisitions made by its subsidiary, The Hawthorne Gardening Company. As of the end of 2017, Hawthorne was responsible for roughly 35% of the company’s total revenue, a 31% increase in total revenue from the prior-year period.
Marijuana industry aside, the bulk of Scotts Miracle-Gro revenue comes from catering to a wide range of products in other markets. This includes Miracle-Gro plant food, a variety of products for lawn and garden (e.g., Turf Builder and Roundup weed killers), and Ortho insecticides.
An added bonus for those seeking weed stocks to invest in is the Scotts Miracle-Gro dividend, which presently yields 2.33%. Scotts has structured itself to continue channeling a little more than half of its earnings into the dividend program. This translates into a nice, consistent flow of dividend payments.
On paper, Scotts Miracle-Gro appears to be the better option of these two marijuana stocks companies, particularly with its significantly higher revenues and longer track record.
With its involvement in other markets, Scotts can also make the best of the marijuana boom without being totally dependent on it. The company’s stocks may be trading at a hefty forward earnings multiple of 17.5, but, even this is a bargain in comparison to Aurora.
What may tip the case out of favor for marijuana stocks Scotts Miracle-Gro and into marijuana stocks Aurora is growth potential.
In the latest quarter, Scotts reported dismal revenue results and projections for revenue growth in 2018 are a meager 2 to 4%. By comparison, Aurora is growing in leaps and bounds – both top and bottom lines – with growth only expected to pick up significantly next year.
Aurora Cannabis, on the other hand, is poised to lay claim of one-fifth of Canada’s recreational weed market upon launch, and with it, a sizable chunk of the expanding MMJ market worldwide. It does have a market cap of $4 billion, which appears astronomical in light of the $30 million or less made in the last 12 months. However, its growth projections still cast a different light upon the company’s stock valuations.
Investing in marijuana stocks Aurora Cannabis is not for every investor and certainly comes with risks. But, comparing Aurora versus marijuana stocks Scotts Miracle-Gro, Aurora still seems to come out on top when it comes to long term growth potential.