Will Aurora Run Out of Money?
Aurora Cannabis (NYSE: ACB) saw sales rise by 154% last quarter and even recorded a profit. However, with Aurora's bottom line benefiting from a large unrealized gain on its derivative liability and the fact that the recreational market wasn't open for business a year ago, the results aren't nearly as impressive as they look at first glance. But the biggest problem facing Aurora today is cash, and whether the company's growth could be the stock's undoing.
During the past three months, Aurora has used up 94.9 million Canadian dollars to fund its operations. That's up 37%, or CA$25.8 million from the same quarter last year. And with Aurora continuing to invest into capital and investing activities burning through an additional CA$29.5 million, the company has been using a lot of cash.
One area that investors will want to keep a close eye on is on the company's noncash working capital. Aurora burned through CA$42.8 million compared to just CA$3.9 million in the prior year. Working capital can fluctuate from one period to the next, but it can also be affected by the level of risk in the industry. For instance, vendors may not be as willing to lend out generous credit terms to cannabis companies given the lack of profitability in the sector, and that could lead to a company like Aurora needing to make invoice payments on a much quicker schedule.
Source Fool.com
