Cann Group Limited's (ASX:CAN) Shift From Loss To Profit

By
Simply Wall St
Published
June 09, 2021
ASX:CAN
Source: Shutterstock

Cann Group Limited (ASX:CAN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Cann Group Limited engages in research and development, cultivation and production, manufacturing, clinical evaluation, processing, packaging, and distribution and supply of medicinal cannabis for various diseases and medical conditions in Australia. The AU$115m market-cap company posted a loss in its most recent financial year of AU$17m and a latest trailing-twelve-month loss of AU$18m leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Cann Group will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Cann Group

Cann Group is bordering on breakeven, according to some Australian Pharmaceuticals analysts. They expect the company to post a final loss in 2023, before turning a profit of AU$9.0m in 2024. So, the company is predicted to breakeven approximately 3 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 69% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
ASX:CAN Earnings Per Share Growth June 9th 2021

Given this is a high-level overview, we won’t go into details of Cann Group's upcoming projects, but, take into account that generally pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before we wrap up, there’s one aspect worth mentioning. Cann Group currently has no debt on its balance sheet, which is quite unusual for a cash-burning pharma, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Cann Group which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Cann Group, take a look at Cann Group's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:

  1. Valuation: What is Cann Group worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Cann Group is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cann Group’s board and the CEO’s background.
  3. 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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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