Canopy Growth (NASDAQ: CGC) experienced a severe sell-off, as it currently trades at the very bottom of its 52-week range. It's almost near the bottom on shorter time spans, including the 50-day range. The stock is currently down -74.62%, severely underperforming the S&P 500 with a loss of -18.25%. The stock's dramatic haircut has left some investors wondering if it's time to invest in the stock or not due to its historically low valuation. MarketBeat recently reported on the views of analysts who cover this stock, and for the short-term, the company is expected to incur a $0.64 per share loss as the consensus forecast. But there are some bulls who are holding out for this stock's recovery as we explore the pros and cons of this cannabis stock.
Why Bulls Like Canopy Growth
Despite the generally bearish sentiment surrounding this stock, there are some reasons to consider it. The most obvious reason is due to its severe discounting. Investors can pick up more of the company for less, both in terms of its assets and sales, and they're also significantly cheaper than its peer companies in the sector median. CGC's FWD Price / Sales ratio stands at 2.85 while the median is 4.53, thus making it 37.19% less expensive. One ratio where the company truly shines is its Price / Book ratio of 0.33, compared with the sector median of 2.13. That's a 84.66% difference.
There's also some evidence that CGC's assets are relatively more efficient at generating profit than its competitors. The company's return on total assets is -5.38%, while the sector median lags behind at -27.12%. This is also reflected in its return in total capital ratio of 7.47% to the sector median of -19.74%
What The Bears Say about Canopy Growth
Despite shining on the valuation and some efficiency metrics, other areas of CGC do not stack up well to the sector median. The company's FWD revenue growth is one of them, as it currently stands at 1.31%, while the sector median has an expected growth of 14.95%. The company also reported a contraction in its CAPEX growth of -77.70%, while the sector median grew at 21.91%
Perhaps analysts have downgraded the stock due to these metrics where the company is underperforming compared to the sector median. Over the last three months, the stock has received 9 down revisions. These revisions have largely been in line with the company's stock performance, which also underperforms the sector median. The company's 5-year price return is -67.86%, while the S&P 500 delivered a positive 73.05%.
CGC Vs. Sundial Growers (SNDL)
Sundial Growers (NASDAQ: SNDL) shares some key similarities to CGC and therefore warrants a comparison. Both companies currently have a similar share price, although the market cap for CGC is significantly higher at 1.14B compared to 543.14M. The rate of return for SNDL is significantly higher at 294.26% YTD compared with CGC's -72.97% contraction. For the last year, SNDL grew at 178.80%, while CGC contracted 88.03%.
Another advantage CGC has over SNDL is that it's trading at a lower valuation. SNDL's Price/Sales ratio stands at 11.74, while CGC has a Price/Sales ratio of 2.23.