Are Cannabis Stocks Better Buys Now That They Are in Cost-Cutting Mode?

For too long, cannabis companies have been aggressively expanding without much regard for costs. Now, however, with the industry's growth stalled and share prices nose-diving, companies are paying more attention to costs and are focusing on reducing expenses and conserving cash. Does this make them better and safer buys right now?

If you've followed the earnings report for cannabis companies, then you've likely seen plenty of references to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). These are adjusted numbers and are not true accounting profits.

Trulieve Cannabis (OTC: TCNNF), for example, consistently posts an adjusted EBITDA profit and even references an adjusted EBITDA margin that's normally around 30%. If those were the company's real profit margins, they would be impressive. But for the first three months of 2023, Trulieve incurred a net loss of $64.1 million, and it was only after making numerous adjustments, including adjusting out legislative campaign contributions totaling $10.5 million, that it was able to get to an adjusted EBITDA profit of $78.2 million.

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Source Fool.com