Aphria has agreements to supply weed in every single Canadian province as well as the Yukon, which tallies to more agreements than any other cannabis company and gives it access to 99% of the Canadian population. Moreover, the company has a very healthy looking balance sheet and has enough cash on hand that it wouldn’t require another capital raise before its production exceeds 255,000 kg/year of production, which leaves the company quite a bit of wiggle room. In spite of these attributes, however, Aphria remains an inexpensive stock, relative to peers, based on relative valuation. This is especially true when its large private supply deals with Auxly (TSXV: XLY) and Emblem are taken into account. That should make the stock in buy to most investors.
Aphria’s a management team has shown their prowess this year in unveiling more announced deals than any weed company, as well as nailing down supply agreements in all 10 provinces and the Yukon. The company also purports to have private supply deals giving it the possibility to produce another 55,000 kg/year in pot sales. Lastly, it has international operations in the Americas, Europe, Africa, and Australia, making it a company with global reach.
Aphria’s strong balance sheet boasts approximately $335 million in net cash, not requiring it to raise capital and the company has a reasonable prospect of being cash-flow positive after recreational weed become legal. Aphria’s market capitalization has reached approximately $5.1 billion, and its enterprise value has now reached approximately $4.6 billion, making it the fourth-most valuable pot company on the market.
When compared to the other largest companies in the space, Aphria’s stock is a great value right now. Its levels of sales are on par with larger companies such as Tilray (TLRY) and Aurora (OTCQX: ACBFF and TSX: ACB), although it has a greater number of agreements both in number of provinces and in population covered than both Tilray and Aurora. Aphria’s valuation numbers look highly attractive to us when matching them up against other companies in the space, especially when Aphria’s private supply deals are taken into account.