Stock Analysis

Cann Group (ASX:CAN) adds AU$14m to market cap in the past 7 days, though investors from three years ago are still down 79%

  •  Updated
ASX:CAN
Source: Shutterstock

This week we saw the Cann Group Limited (ASX:CAN) share price climb by 16%. But the last three years have seen a terrible decline. Indeed, the share price is down a whopping 79% in the last three years. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

While the last three years has been tough for Cann Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Cann Group

Because Cann Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Cann Group saw its revenue grow by 54% per year, compound. That's well above most other pre-profit companies. So why has the share priced crashed 21% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. If the company is low on cash, it may have to raise capital soon.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
ASX:CAN Earnings and Revenue Growth October 7th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that Cann Group shareholders have received a total shareholder return of 1.7% over the last year. That certainly beats the loss of about 12% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Cann Group has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Valuation is complex, but we're helping make it simple.

Find out whether Cann Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About ASX:CAN

Cann Group

Cann Group Limited engages in the breeding, cultivation, production, manufacturing, clinical evaluation, and supplying medicinal cannabis for sale and use within Australia and for overseas export markets.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance0
Financial Health1
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Slightly overvalued with worrying balance sheet.