Challenges in the marijuana industry are nothing new; profitability, in particular, has always been an issue for the Canadian pot companies. Their U.S. counterparts, on the other hand, have managed to generate profits. Ups and downs in the Canadian cannabis market -- regulatory delays, fewer legal stores than expected, and a thriving black market -- have weighed on profits.

Ontario-based Aphria (NASDAQ: APHA), however, is bucking the trend with a track record of consistent profitability over the past five consecutive quarters. So what is Aphria doing right? Here are three reasons that it is not too late to buy this stock.

1. Aphria's revenue numbers are outstanding

Aphria cultivates and sells medical and recreational cannabis products, with a compelling product portfolio that includes brands like its namesake Aphria, Broken Coast, Solei, RIFF, and Good Supply.

In the cannabis space, Aphria has an upper hand in sales, with fiscal 2020 revenue coming in at $543.3 million Canadian dollars, a year-over-year increase of 129%. Comparatively, Canopy Growth (NYSE: CGC) -- which boasts a market cap of $6.1 billion, almost 4 times Aphria's $1.3 billion -- reported revenue growth of 76%, to CA$399 million, for the same period.

Meanwhile, Aurora Cannabis (NYSE: ACB) reported net revenue growth of 16%, to CA$75.5 million, for the third quarter of 2020 from the prior-year quarter, while Cronos Group's (NASDAQ: CRON) second-quarter net revenue came in 29% higher than the year-ago quarter at CA$9.9 million. Both companies, which have market caps between $1 billion and $2 billion, are not even close yet to pulling off what Aphria has already achieved for the full year.

2. It has a track record of consistent profitability

Strength in Aphria's medical and adult-use market has helped it reach higher revenue and profits. In its recent fourth quarter, ended May 31, Aphria reported consolidated adjusted EBITDA (earnings before income, tax, depreciation, and amortization) of CA$8.6 million. That's a stunning 49% increase from CA$5.7 million in the year-ago quarter. (Positive EBITDA gives a sense of how well a company is handling its operating expenses.) Meanwhile, Aurora and Canopy have yet to achieve profitability.

Shares of Aphria have declined 12.4% so far this year, a smaller loss than Aurora's fall of 63.2% and Canopy's fall of 22%. The industry benchmark, the Horizons Marijuana Life Sciences ETF, has declined by 25.3% in the same period.

APHA Chart

Aphria's net revenue was up 18% from the year-ago quarter to CA$152 million, with CA$65.4 million coming from cannabis products and CA$99.1 million from distribution revenue (from its German-based subsidiary CC Pharma and other distribution companies), less CA$12.3 million in excise taxes. Medical cannabis accounted for 13% of cannabis revenue, while recreational products made up the rest.

3. It has a strong leadership team

I attribute Aphria's strong revenue numbers and consistent profitability to its asset-light business model under the leadership of CEO Irwin Simon, who took over the reins as interim CEO in March 2019. Before that, he served as the independent chair of its board of directors. Simon is is the founder and former CEO of packaged goods company Hain Celestial Group, which reported $2.3 billion in revenue for fiscal 2019.

Irwin's strategy of focusing Aphria on its core operations in Canada has played out well. In contrast, Aurora has been on an acquisition spree that has left that company with a huge debt burden. Rising demand for cannabis made Aurora eager to capture the market, and management spent a huge amount of money acquiring other companies and expanding its facilities to ramp up production. However, external headwinds in the Canadian market affected revenue -- a lot. And then-CEO Terry Booth stepped down in February, adding to Aurora's pain.

What does 2020 look like for Aphria?

Aphria has already created a stronghold with its medical and recreational cannabis operations in Canada, Germany, Italy, Malta, Colombia, and Argentina. Canada made recreational cannabis derivatives (vapes, edibles, concentrates, beverages, chocolates, and more) legal under "Cannabis 2.0" in October 2019, and Aphria was the first company to launch a variety of vape products in Canada. Its vape products have generated good sales.

All that said, Aphria reported a net loss of $98.8 million in Q4, driven by higher selling, general, and administrative (SG&A) expenses of CA$116.6 million. Changes made in its international operations caused a $64 million non-cash impairment charge, which contributed to the loss; I wouldn't fuss about this one-time coronavirus-related charge.

I'll be encouraged to see Aphria prioritize launching other varieties of derivatives, given the strong competition in the market. Canopy launched a diversified set of vapes, chocolates, and beverage products in May and has seen good sales numbers with positive feedback, according to its Q1 report.

Management has said it believes vape products in particular "represent a growing proportion of the Cannabis 2.0 market." Its cash position remains robust, with CA$497.2 million of cash and cash equivalents on the books in the recent quarter to fuel its expansion plans in Canada and internationally.

An already stable business, a strong leadership team, a robust balance sheet, growing revenue and profits, and innovative products all make Aphria an excellent cannabis pick for 2020. 

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