Interested in Aurora Cannabis Stock? Try These Companies Instead

Hexo Corp (TSX:HEXO)(NYSE:HEXO) and Aphria Inc (TSX:APHA)(NYSE:APHA) could be better buys in the growing industry.

| More on:

Cannabis stocks are likely among the most polarizing stocks today. After it was announced that Canada would be legalizing the use of recreational marijuana, cannabis stocks experienced tremendous growth. Unfortunately, they have since fallen and have yet to recover to their previous levels. Now, with the recent impressive run by Aurora Cannabis (TSX:ACB)(NYSE:ACB), is it time to give these companies another look? Before you rush to get your hands on Aurora Cannabis stock, give Hexo (TSX:HEXO)(NYSE:HEXO) and Aphria (TSX:APHA)(NYSE:APHA) some consideration.

Valuation metrics

Since Aurora, Hexo, or Aphria are not profitable, we cannot use price to earnings as a comparator. However, we can still use other metrics, such as price to sales and price to book. Typically, a price-to-sales ratio between one to two would be considered good value. Aphria falls the closest to this range, with a 2.95 price-to-sales ratio over the past 12 months at the time of this writing. Hexo is the next closest at 6.40, and Aurora, arguably the most popular cannabis stock, has a sky-high 7.58.

Regarding the price-to-book ratio, value investors will typically look for ratios under one. Aphria finished the most recent quarter with a 0.83 price-to-book ratio, and Aurora and Hexo finished their most recent quarters with nearly identical ratios of 0.59 and 0.58, respectively. This indicates that all three companies are showing good value at the moment.

Revenue

Another important aspect to consider is the revenue growth that a company exhibits, as this can speak to its ability to gain market share and the general demand a company encounters. Aurora reported a respectable increase in revenues of 449% from fiscal year 2018 to 2019. The 642% increase in revenue experienced by Aphria was the next highest between the same years. Finally, Hexo showed the greatest increase in revenue from year over year, a staggering 963%. These numbers indicate that while all three companies are still showing excellent growth in revenue year over year, the lesser-known cannabis companies appear to be growing at a much larger rate.

Insider ownership

Generally, a large ownership stake by insiders is seen as a positive thing for public companies. It allows the executive team to maintain control of voting rights and indicates to investors that insiders believe in the company. Therefore, comparing the respective amounts of insider ownership between these three companies could provide insight into the potential that each executive team has in their company.

Aphria currently has the least insider ownership, with just 2.84% of shares belonging to insiders. Aurora Cannabis has a marginally greater amount at 2.90% of shares outstanding. Again, Hexo has the most impressive numbers in this metric, with its insiders holding an impressive 5.83% of shares.

Financial position

The final comparison between Aurora, Aphria, and Hexo is regarding financial position. Aurora currently has just over $551 million in cash and cash equivalents, while only reporting $6.3 million in current debt. This would indicate that the company would be able to cover all of its debt in the near future. Aphria is less impressive with about $173 million in cash and cash equivalents while being on the hook for just under $250 million of debt due within the next year. In this case, the company would likely need to raise capital at some point, potentially diluting shareholders. Finally, Hexo is currently showing a relatively safe financial position with $139 million in cash on hand and only $52.6 million in debt.

Conclusion

Depending on the valuation metric you use to evaluate a company, you can easily make a solid argument for choosing either Hexo or Aphria over Aurora. In fact, Hexo came out on top when looking at revenue growth and insider ownership, while maintaining a safe cash position. Although the impressive run Aurora Cannabis has shown recently is well documented, Hexo and Aphria may be better buys at this point in time.

Should you invest $1,000 in Bank of Montreal right now?

Before you buy stock in Bank of Montreal, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bank of Montreal wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends HEXO. and HEXO. Fool contributor Jed Lloren has no position in the companies mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Cannabis Stocks

Cannabis business and marijuana industry concept as the shadow of a dollar sign on a group of leaves
Stocks for Beginners

Buy the Dip Before It’s Too Late: This Canadian Stock Won’t Stay Cheap Forever

Investors might think that cannabis stocks are out, but this one could be the top Canadian stock to consider.

Read more »

a person watches a downward arrow crash through the floor
Stocks for Beginners

Plummet Alert: Is This TSX Growth Stock a Bargain or a Falling Knife?

This growth stock was once a major winner, but can investors wait for more?

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

What to Know About Canadian Cannabis Stocks for 2025

Let's dive into two top Canadian cannabis stocks and where they may be headed from here (given the recent moves…

Read more »

Researcher works in hemp field
Cannabis Stocks

Aurora Cannabis Stock Is up 46% in 2025: Are Investors Going From 5 Years of Pain to a 2025 Gain?

Shares of Aurora Cannabis have staged a comeback in 2025, outpacing the broader markets comfortably. Is ACB stock a good…

Read more »

A plant grows from coins.
Stocks for Beginners

3 Growth Stocks That Could Skyrocket in 2025 and Beyond

It could be a big year for these sectors, and these growth stocks in particular throughout 2025.

Read more »

money goes up and down in balance
Tech Stocks

2 TSX Stocks to Buy and 2 to Avoid in the Looming Trade War

The looming U.S.-Canada trade war has changed the business environment. Here are some TSX stocks to buy and avoid in…

Read more »

space ship model takes off
Cannabis Stocks

2 Canadian Stocks With Strong Momentum for 2025

Celestica Inc. (TSX:CLS) stock and Dollarama (TSX:DOL) stock have sustained strong price growth momentum for a long time.  Here’s why…

Read more »

Worker tags plants at an industrial cannabis operation
Cannabis Stocks

Pot Stocks: Buy, Sell, or Hold in 2025?

Cannabis stocks remain a bit risky, but could long-term investors be in for more pain or far more profits?

Read more »