Stock Analysis

Breakeven On The Horizon For Auxly Cannabis Group Inc. (CVE:XLY)

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We feel now is a pretty good time to analyse Auxly Cannabis Group Inc.'s (CVE:XLY) business as it appears the company may be on the cusp of a considerable accomplishment. Auxly Cannabis Group Inc. operates as a consumer packaged goods company in the cannabis products market in Canada. The CA$281m market-cap company posted a loss in its most recent financial year of CA$103m and a latest trailing-twelve-month loss of CA$116m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Auxly Cannabis Group's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Auxly Cannabis Group

Auxly Cannabis Group is bordering on breakeven, according to the 5 Canadian Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of CA$13m in 2023. The company is therefore projected to breakeven around 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 65% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

TSXV:XLY Earnings Per Share Growth March 24th 2021

We're not going to go through company-specific developments for Auxly Cannabis Group given that this is a high-level summary, however, take into account that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Auxly Cannabis Group is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Auxly Cannabis Group's case is 54%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Auxly Cannabis Group, so if you are interested in understanding the company at a deeper level, take a look at Auxly Cannabis Group's company page on Simply Wall St. We've also compiled a list of important factors you should further research:

  1. Valuation: What is Auxly Cannabis 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 Auxly Cannabis 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 Auxly Cannabis 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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Valuation is complex, but we're helping make it simple.

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