In my view, investors should probably avoid buying shares of Sundial Growers .
In the past 12 months, it had an outflow of CA$263.66 million in cash, which was partially a result of paying off $122.92 million in long-term debt.
Given that its trailing operating expenses were CA$225 million, the company’s reserves will be running quite low if it chooses to make a similarly large debt payment over the next year.
While management has touted that scaling back its operations as part of its transformation plan will result in as much as CA$80 million in annual cost savings, that might not be enough if it comes at the expense of left-behind revenue.
Something’s got to give, whether it’s shrinking revenue, high costs, or the tight cash situation.
In contrast to Aurora Cannabis, Sundial Growers has a strong financial position.
Aside from its much larger runway, Sundial is also a company that’s building out new business units and making transformative acquisitions to enter new markets.
With the proposed acquisition of Alcanna, Canada’s largest private liquor retailer, for CA$346 million in stock, Sundial will also gain a controlling stake in Nova Cannabis.
The company’s investments may give it a new life, but it still hasn’t proven that it can profitably sell any single product for an appreciable amount of time.