Cannabis Aurora (TSX: ACB) (NYSE: ACB) is a global medical cannabis company founded in 2006. The company maintains nine medical cannabis brands, including Aurora, CanniMed and MedReleaf. Exclusive supply contracts with Italy, Germany, Brazil and Australia give Aurora a distinct advantage over its competitors.
The share price of Aurora did not do as well as the peers Canopy growth (TSX: WEED) (NYSE: CGC) e Cronos Group. Based on data from the most recent quarter, Aurora's share price per share is lower than Canopy Growth and its debt is much higher. However, these balance sheet data could be more misleading for investors than profits.
Contrary to what investors might deduct from its balance sheet, Aurora offers high-value strategic partnerships, foreign government supply contracts and brand acquisitions. Aurora's financial statement assessments do not give enough credit to these investments.
Aurora exports to Germany and the United Kingdom
Aurora has an international advantage over its peers, including Canopy Growth. At the beginning of 2019, Aurora started regular cannabis oil exports to the United Kingdom and Germany. Furthermore, Aurora has valuable long-term exclusive contracts with foreign governments to sell cannabis oil.
The U.K. and Germans are now distributing Aurora's medical cannabis oil on a medical prescription. In addition to government contracts, Aurora has a broad portfolio of pharmaceutical partnerships with recognizable names such as PharmaChoice, Pharmasave and Shoppers Drug Mart.
The current preferred investor, Canopy Growth, has not yet built a large export portfolio like Aurora.
Aurora expands the product line
Aurora's acquisitions are strategically brilliant. This quarter, the company announced the addition of Hempco Food and Fiber and Chemi Pharmaceutical.
Hempco expands Aurora's brand portfolio into Planet Hemp and Praise. Under these brands, the company markets products such as hemp protein powder and cold-pressed hemp seed oil. Certified organic, vegan, raw and kosher, these niche and specialty foods are popular among fashionable millennials interested in burning extra money on diets and health-conscious brands engaged in socially conscious procurement practices.
Chemi adds the critical research and development capacity to Aurora. The company develops innovative products for antiseptic, skin care and medical applications. Over the next two years, Aurora will probably have some exciting versions of the product to be announced as the company develops beauty products and cannabis-based first aid.
Both Canopy Growth and Aurora report both equity valuations that do not tell the whole story. Aurora offers long-term value beyond current stock valuations given the company's broad portfolio of brands and export contracts in high-growth markets.
This means that investors should be careful not to compare Aurora and Canopy Growth balance sheets to determine which is the best buy. Aurora may prefer low-cost debt to high-cost equity financing. The volatility and high cost of equity markets are an incentive for Aurora to avoid a valuation of market value per share.
The lesson is not to judge a stock only by its book value, as it is often much more between the lines. More experienced investors interested in capitalizing on this new legal industry may want to consider placing a good purchase order up to $ 8 for Aurora shares and then waiting for volatility. In the end, Aurora will reduce its power, will empty its capital and start investing in its own shares. That's when patient investors will begin to see the true market value of the stock emerge.
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Fool collaborator Debra Ray has no position in any of the stocks mentioned.
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