When most people look at an earnings report, their eyes glaze over. But because you’re a founding member of the National Institute for Cannabis Investors, I’m going to teach you how to separate the signal from the noise. That’s how you find the biggest and best profit opportunities…

As we speak, the U.S. cannabis industry is in the heart of earnings season, meaning hundreds of firms across the country are releasing their financial results for Q4 2018.

Now, typically, investors lean on these earnings reports to gain insight into how well a company is run or if its performing well.

And, for the most part, I agree it’s a great tool.

IF you know what to look for.

Frankly, companies know that investors look to these reports to make decisions. So you can bet they are going to present the rosiest picture of the company’s financials as they can.

The key is knowing how to look beyond the “flash” to spot the real diamonds in the rough.

That’s why today, I’m going to share the “magic formula” I follow when looking through every cannabis earnings report.

Better yet, I’ll share three things you should always ignore.

Let’s jump right in…

There are exceptions to every rule, but here are some tips which might help you navigate all these earnings reports more successfully.

Three Things to (Usually) Ignore

The first is revenue during the fourth quarter.

I know that may sound surprising – as revenue is the life blood of a company – so I don’t suggest completely ignoring that key indicator.

But numbers from Q4 are often meaningless.

For example, Acreage Holdings had revenue in Q4 right around $10.5 million. Looking forward, it’s meaningless.

Adjusting for various acquisitions the company made between October 1 and December 21, revenue would have been more than double that – $22.9 million to be exact.

And even that is too low.

Many dispensaries opened towards the end of the year, and it always takes a few months or even a year to get the stores’ revenue up. That doesn’t matter for a company with hundreds of stores with only a few of them opening during the quarter, but it’s a huge difference for these small, rapidly growing cannabis companies.

Speaking of dispensaries opening, don’t put too much stock into current store counts.

A company’s dispensary count is one of the most important metrics of its success as it spreads across the United States. But investors should be looking forward, not back.

By the end of the year almost all of the big U.S. multi-state operators (MSOs) will have many more dispensaries than they did back in December, or even right now. A far more important piece of information to focus on is the company’s build-out plans. That will give you a much better indication of where the company you’ve invested in is heading.

Finally, don’t get caught up in the share price right after earnings. That is, unless a stock is being oversold, allowing you to pick up shares at a discount.

A lot of investors trade stocks immediately after an earnings announcement. Some of them have different motives than you, so keep that in mind if you see a share price wildly fluctuate.

Specifically, a lot of people who have big profits in a stock often set an earnings date to sell some of their shares. All of these people with different motivations and different levels of knowledge mean that stocks of smaller companies, like cannabis companies, often don’t react the way a larger stock might after earnings.

To take a recent example from Charlotte’s Web Holdings Inc. (CSE: CWEB, OTC: CWBHF), the stock was down by nearly 2% on the day it announced earnings.

For a bigger company, that indicates that people were disappointed with the earnings.

In the three trading days since, the stock price climbed 20%.

The lesson being – don’t let the knee-jerk reactions of others inform your analysis of a company or its stock.

Three Things to (Usually) Focus On

Because some expect the U.S. cannabis industry to eventually be worth $1 trillion, looking at where companies operate and their expansion plans are important tidbits to review during an earnings release.

Some states are better than others for near-term revenue generation, but in the long battle to build a national brand, more states is better.

Alternatively, a company can have its full focus on a single state, making it an attractive acquisition candidate. If a company is only in two or three states and doesn’t have a clear path to entering more, it’s reasonable to ask the company’s executives whether they see the company as an attractive acquisition candidate or what the company’s plans are for the day it is surrounded by bigger, better-financed competitors.

The second thing to usually focus on is cash and cash burn. Most cannabis companies are losing money on an operating basis, and they are spending millions of dollars in capital expenditures.

That’s fine, because they are spending in anticipation of future revenues. In other words, they think that how they are spending their money will make them even more money in the future.

However, they can’t do that forever.

Looking at how much cash the company has left and how much it is using per quarter can give you a rough idea of when the company must turn profitable or raise more capital before it may be forced to shut its doors.

When a company makes its more complete regulatory filings, focus on a section called “liquidity and capital resources,” or something with a similar name for more details.

If you want a shot to get even richer from America’s next trillion-dollar transformation, you need to know about the ULTIMATE pot stock investing tool. Our comprehensive cannabis database contains protected information on every publicly traded cannabis company on the market, future IPOs, and numerous front-runners and startups. We call it “The Vault” – and you can see how it works right here.

Finally, take a look at the projections a cannabis company releases during its earnings.

Many companies do not offer projections of future revenue or cash flow. But for those who do, that is the reason why most investors are holding them.

If a company beats its public projections, its stock price will generally go up. If company executives fall short of the projections they made, the stock price will almost certainly go down.

I hope you find these tips helpful for your own cannabis investments. For those of you who prefer to stick to the stocks we recommend at the Institute, be assured that I’ll have full reports as each company reports earnings.


Greg Miller

Executive Director, National Institute for Cannabis Investors

P.S. Nothing is more profitable than a successful IPO – and for smart investors who get in on IPO day, the gains can be life-changing. We’re talking about the potential for these stocks to soar 200%, 500%, 1,000%, or more – practically overnight. And today, you can get in on the next high-flying companies set to go public in a matter of weeks. Take an inside look here.


Comments

17 responses to “This Is How to Read a Cannabis Earnings Report like a Pro”

    • Susan,
      NICI does not sell stock on their site. You need to open a brokerage account with Charles Schwab, TD Ameritrade, ETrade or others. Make sure the company will be able to let you buy not only in NYSE, but also CSE (Canadian Security Exchange) or OTC (Over The Counter – sells in both US and Canada.
      Have you joined NICI? Go to FAQs. Best to you!

  1. Awesome information. Reiterating that we are building out big time in California. We are being told that the cannabis industry will explode and grow tenfold here in California. We are already seeing a building boom with cannabis start to happen here in California. I would know because we are building big cannabis facilities here in California and this building boom with cannabis is starting to really bring in high level economic activity. Construction and cannabis are my specialties and we are really starting to build big time here in California and this industry will become huge and obviously start with us first, meaning huge California first mover advantage. I love being an insider and part of this industry big time with cannabis and construction we love it

    • I don’t know anything about this only have a few dollars but I’d like to invest maybe you can let me know how you doing and how I can do it help Gloria

  2. I would like to see Warren Buffett put down a considerable amount of money on the cannabis movement. He can change the current state of affairs… Let 420 be a moment of history with a considerable trillion dollar contribution.

  3. I totally agree with David Zimmerman’s comment. Spot On!
    I was convinced the day that Cannabis Investors launched, that it
    had a product that is high demand worldwide. Medical or recreational,
    it is a product that helps your health, and everyone can use and benefit
    from CBD. Legal in all 50 states, it not only works, but in an ulterior way,
    it is removing the stigma of Cannabis use in our world. I am happy and
    proud that our economy and society has been educated toward more
    acceptance of One Love, I am happy to be a lifetime Elite member.
    I love the NICIlytics program. I own 9 stocks since Oct 26 launch and
    have made 23.55 % on my original investment less broker expense of
    $6.95 per trade using E*Trade. I am all in with cannabis since 1969!

  4. Hey Greg,
    I’m invested in TGOD and have been for quite some time. My question is what’s going on with the stock price. Its lagging compared to the other growers. TGOD from what I understand is debt free and has plenty of cash to do whatever or buy whoever they wish, relatively speaking. So why are struggling to maintain a decent share price relative to their peers.

  5. Can not buy stocks that are over twenty cents a share but I never see any recommended there are a lot of folks on fixed income that can not pay $1.00 a share . Do you think that buying 100 shares of a stock at say $1.00 would be worth it?

    • Oh heck yes. How do you eat an elephant? One bite at a time. Baby steps. Soon you will be buying 500 and then 1000 shares with the returns from the 100 shares. Just start.

  6. I have bought almost all of Greg’s stock pic’s and over all I am up 15 percent …pretty good since i only started in December. Thanks Greg! Always excited to hear from you with your IPO news! Great Job!

  7. I’m new here to this research group looks like some good info I have a brokerage acct with TD ameritrade does anyone know how much money one needs to start in this industry as far as buying stock?

  8. Bonjour,
    Voudriez vous nous parler de TILRAY qui baisse tous les jours faut-il vendre
    ou attendre encore ,quel est votre sentiment ou votre avis ?
    merci de votre réponse rapide .Salutations
    Guy ( France)
    Would you like to talk to us about TILRAY dropping every day should we sell
    or wait yet, what is your feeling or your opinion?
    Thank you for your quick reply. Greetings
    Guy (France) 33468297975

  9. I have been a member of NICI for over a year now. As I had NO experience in buying stock prior to joining, I followed some companies “on paper” … and saw some stocks grow while others barely kept me in the black.
    Recently I took the plunge … put $600. in a brokerage account and started buying a few stocks.
    Yesterday I was down $15.00 on my overall investments. But, after “playing” for a year, I know stocks go up and stocks go down. I’m sitting on the stocks I’ve purchased until I see something from NICI telling me it’s time to sell.
    Thank you, Greg and your team of experts, for giving me the little bit of confidence I have now. I’m hoping I’ll see some growth in my portfolio 💼!

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