Stock Analysis

Auxly Cannabis Group Inc. (TSE:XLY) Just Reported And Analysts Have Been Cutting Their Estimates

  •  Updated
TSX:XLY
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Last week, you might have seen that Auxly Cannabis Group Inc. (TSE:XLY) released its yearly result to the market. The early response was not positive, with shares down 4.1% to CA$0.35 in the past week. Results overall weren't great; even though revenues of CA$51m beat expectations by 13%, statutory losses ballooned to CA$0.14 per share, substantially worse than the analysts had expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Auxly Cannabis Group after the latest results.

Check out our latest analysis for Auxly Cannabis Group

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TSX:XLY Earnings and Revenue Growth April 29th 2021

Following the latest results, Auxly Cannabis Group's five analysts are now forecasting revenues of CA$74.9m in 2021. This would be a sizeable 47% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 63% to CA$0.05. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$89.8m and losses of CA$0.047 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

The average price target was broadly unchanged at CA$0.57, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Auxly Cannabis Group, with the most bullish analyst valuing it at CA$0.85 and the most bearish at CA$0.40 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Auxly Cannabis Group's past performance and to peers in the same industry. We would highlight that Auxly Cannabis Group's revenue growth is expected to slow, with the forecast 47% annualised growth rate until the end of 2021 being well below the historical 85% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 33% per year. So it's pretty clear that, while Auxly Cannabis Group's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target held steady at CA$0.57, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Auxly Cannabis Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Auxly Cannabis Group analysts - going out to 2025, and you can see them free on our platform here.

Even so, be aware that Auxly Cannabis Group is showing 3 warning signs in our investment analysis , you should know about...

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