Cash Positive: Has Aurora Cannabis (ACB) Finally Turned the Corner?

11 states are set to vote this November on legalizing or expanding Marijuana use in 2024, joining 24 that have already legalized recreational use.

Yet, it still remains a federal crime in the U.S., while elsewhere in the world, its legality continues to expand.

Canada has become the home to several cannabis companies, including Aurora Cannabis (ACB), the top cannabis stock search by financial pros in the past month.

The company achieved a significant milestone last quarter, generating positive cash flow from operations and free cash flow.

But shares have yet to see any lift, drifting lower day by day.

Does that make Aurora Cannabis worth considering, or should you stay away?

Aurora Cannabis’s Business

Aurora Cannabis hopes to stand out in the competitive global cannabis industry with its focus on high-quality medical and consumer products. 

The company’s innovative approach spans cultivation, product development, and strategic international expansion across multiple continents.

Operating in over 25 countries, Aurora produces a diverse range of cannabis offerings, including dried flower, oils, capsules, and edibles. 

Aurora’s state-of-the-art facilities and advanced genetics program enable consistent delivery of premium products to medical patients and adult-use consumers. As a result, Aurora has established itself as a leader in the high-margin medical cannabis segment globally.

Aurora Cannabis segments its business into the following areas:

• Medical Cannabis (57% of total revenues) – Serves patients in Canada and key international markets like Germany and Australia.
• Consumer Cannabis (14% of total revenues) – Provides adult-use products in the Canadian recreational market.
• Plant Propagation (28% of total revenues) – Produces vegetable and ornamental plants through its Bevo Agtech subsidiary.
• Bulk Wholesale Cannabis (2% of total revenues) – Supplies cannabis to other licensed producers.

Aurora’s Q1 2025 results showcased strong momentum, with net revenue up 12% year-over-year to $83.4 million. 

The company achieved a positive free cash flow of $6.5 million, reaching this milestone six months ahead of projections. 

The recent acquisition of MedReleaf Australia has further solidified Aurora’s position in the rapidly growing Australian medical cannabis market. This move aligns with the company’s strategy to expand its global medical cannabis footprint and capitalize on emerging international opportunities.

Financials

Source: Stock Analysis

After explosive revenue growth in 2019, sales leveled off.

However, management’s focus on profitability helped bring the gross margin up to 54% while trailing operating and profit margins remain underwater.

However, the company generated $6.1 million in cash from operations (8.4 million CAD) last quarter. Annualized, which puts it at a price-to-cash flow ratio of 51x.

Aurora also achieved a positive EPS of $0.13, its first since 2020, putting it at an annualized P/E ratio of 10.8x.

The company also holds roughly 100 million CAD in debt and cash on its balance sheet.

Valuation

Source: Seeking Alpha

Generally speaking, cannabis companies are not profitable on a P&L basis. So, none of the tickers on this list have P/E ratios.

However, Sundial Growers (SNDL) and Cronos Group (CRON) generate cash from operations.

Sundial, in particular, trades at a reasonable 14.7x cash flow, while Cronos matches Aurora’s 51x multiple on cash flow that we calculated earlier.

Growth

Source: Seeking Alpha

Growth is very individual and lumpy for each of these companies.

You can see how Tilray (TLRY) shows consistent double-digit revenue growth while Sundial Growers has slowed down markedly.

Because of increasing competition and difficulty turning a profit, we don’t see any company on this list that generates consistent free cash flow or profit growth.

Profitability

Source: Seeking Alpha

Aurora’s gross margin is far superior to any others on this list, which is unusual.

It’s also worth noting that only three tickers generated free cash flow for the prior 12-month period.

Our Opinion 7/10

Aurora Cannabis has a long way to go before it becomes a consistently profitable venture.

Yet, it’s incredibly high gross margins are rather intriguing.

With asset write downs eating up over 37 million CAD in profits last year, we see a high probability Aurora will continue to generate positive cash flow and begin to deliver true value to its shareholders.

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