Is Aurora Cannabis the Best Pot Stock to Buy Now? –

There’s no sugar coating it: Cannabis stocks have had a tough ride in the second half of October. Collectively, the group was hammered as the overall markets took a hit. Surprisingly though, many cannabis names held up fairly well — Aurora Cannabis (NYSE:ACB) included.

That’s as recreational marijuana became legal in Canada in mid-October. Several stocks broke out just ahead of the event, only to reverse lower and join the major selling theme of the market. It set up as one great sell-the-news event, something we weren’t surprised about when we looked at Canopy Growth (NYSE:CGC) earlier in the month.

With many cannabis stocks making major moves lower, it no doubt brought some investors back to the table. They want to know, is it time to buy cannabis stocks, and specifically, is ACB stock a good one to buy?

Valuing Aurora Cannabis Stock

The company’s growth is actually pretty solid, with ACB stock racking up $55 million in sales for fiscal 2018, which ended on June 30. That was a tripling from the prior year’s $18 million in sales.

While that’s great from a sales perspective, I worry about cost control in getting to that point. For instance, cost of goods sold (COGS) increased nearly 6-fold, from $2 million to $11.7 million. SG&A expenses swelled from $17 million to $72 million and total operating expenses increased from $27.7 million to $135.3 million.

Because of “other income” on the income statement, it skews net income to the positive side, implying the company earned almost $72 million last year. On the surface, that looks like 46% net profit margins, but that’s not the case by any means. So investors need to be aware of that before they take these surface numbers at face value.

Between 2017 and 2018, total debt went from

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