Cronos Group Inc revenue is up, is it time to buy?

Cronos Group Inc (NASDAQ:CRON) had a bumpy first quarter. The company’s revenue jumped 25.05 million euros, up 98.5% year-on-year. The stock’s other fundamentals were also clearly in the green, with net profit up 79.77% and diluted EPS up 79.55%. The company’s strong past performance could indicate that it will maintain this trend and post a positive earnings chart for the second quarter of 2022, scheduled for August 9.

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When Cronos Group’s first quarter results were announced this year, the company’s shares rose 14% after beating revenue estimates of $1 million. A similar jump could be on the cards if Q2 results are just as or more positive than last. So let’s look behind the curtain and see if such a leap is possible.

Analyst expectations

Analysts are split down the middle when it comes to the company’s near-term performance. In the past three months, the company has received 6 upward revenue revisions and 5 downward revenue revisions. An analyst gave the stock a positive EPS review. Cronos Group shares are currently up 31.54% over MarketBeat’s consensus price target. Analysts have generally overestimated the performance of Cronos Group shares over the past five years.

In terms of company rating, the company was covered by 13 analysts, giving it an average buy rating. This was helped by 3 analysts giving the stock a strong Buy recommendation and 2 analysts giving it a Buy recommendation. The majority of analysts (7) who reviewed the stock gave it a hold rating while one analyst gave it a sell rating.

Growth and efficiency

Something that works in the company’s favor is the fact that its revenue growth and efficiency metrics exceed industry medians for several important ratios. The company’s revenue growth was 70.65%, a difference of 355.62% compared to the industry median of 15.51%. On an FWD basis, business growth is also strong at 51.89% compared to the industry median of 14.36%.

Although Cronos Group is currently not profitable, its asset utilization is proven to be more efficient than its competitors in the industry. This efficiency is reflected in its return on total capital at -7.86% for sectors -20.39%. The company’s return on total assets at -19.51% is also lower than -28.18% for the sector.

Investor risk appetite for speculative stocks

One factor that could throw a spanner in the works is that cannabis stocks as a whole have been off since 2021. Cronos Group shares are currently down -20.24% year-to-date and several of the The company’s competitors also suffered a contraction in their share prices. Canopy Growth (NASDAQ:CGC) suffered more with a contraction of -72.47% and Tilray Inc (NASDAQ:TLRY) contracted -47.53%.

The lack of hope for federal legalization has been a major headwind for this industry, as well as investors putting their money into more defensive investments and away from value stocks. Negative earnings companies have been punished by a rotation into dividend-paying companies as a recession becomes more apparent with GDP falling for a second consecutive quarter.

Article by Matthew North, MarketBeat

Updated

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