Sundial Growers (NASDAQ: SNDL) is a licensed producer that crafts small-batch cannabis using state-of-the-art indoor facilities. Its brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto and Grasslands. The company was founded in 2006 and is headquartered in Calgary, Canada.
Sundial Growers' stock is trading at approximately $0.74, as of 28 Mar 2022, and is up by 19% year-to-date (YTD). Over the past 12 months, the stock is down by 34%, whilst the S&P 500 is up by 16%, meaning the stock has underperformed the broader market by approximately 50% over this period.
Is Sundial Growers a long-term investment opportunity? Let’s take a closer look and see what the numbers tell us.
Why fundamentals matter
Analyzing a company’s fundamentals gives us key insights into whether or not it will be a good 'buy and hold' investment.
By 'fundamentals', we mean a set of key metrics which include price to book value (P/BV), earnings per share (EPS) and debt. When looked at together, fundamentals can tell us whether or not a company is likely to be a good investment, and for as long as investors have been buying stocks, they have relied on fundamental analysis to assess the financial health of an organization as well as its growth prospects.
What do Sundial Growers’ fundamentals tell us about the investment opportunity? Let's have a look.
SNDL stock: the fundamentals
First, let's look at Sundial Growers' EPS. This metric is important to help us understand how profitable the company is on a 'per share' basis, and it is calculated as net income (after dividends on preferred stock) divided by the number of outstanding shares. So if a company has $1 million in profit and 1 million shares of outstanding stock, it will have an EPS of 1.
SNDL's EPS is -0.8 based on figures from its last reported balance sheet, and this improved by 68% year-on-year, which is a positive sign.
Next, let's look at Sundial Growers' price to book value (P/BV), which tells us how much investors are willing to pay for a company's assets. P/BV is used by value investors to identify potential investments, and is calculated by the company's stock price divided by its net assets (or 'book value', meaning the value of all assets which appear 'in its book').
Based on its most recent financials, Sundial Growers' P/BV is 1.5, which is 16% lower than the industry benchmark of 1.8.
Finally, it's always worth looking at a company's debt profile before deciding to invest in order to assess the risk. A high amount of debt can be a problem if a company is not generating enough cash flow to service its debt, and some sectors rely on debt more heavily than others.
As of 28 Mar 2022, Sundial Growers has total debt of $1.13m, and this has gone down by 99% over the past year. The company also has cash & short-term investments totalling $51.58m, giving it a 'net debt' of $-50.45m.
Based on these figures, Sundial Growers' current levels of net debt don't worry us, as the company generates enough revenue to service its debt, and is not using debt to fund their operations, which is good to see.
SNDL stock: should you invest?
In summary, we saw a mixed outlook for Sundial Growers' stock based on its fundamentals.
Significantly, the stock is up by 19% YTD and is outperforming the broader market YTD. Furthermore, compared to companies in the same sector, SNDL has a lower P/BV. These are all positive signs.
However, the stock is down by 34% over the past year, which is a worrying sign. Based on this, we think that Sundial Growers is one for the watchlist.
As with any stock however, there are additional factors to consider before making an investment decision. This analysis is general in nature and based on historical data, and it does not take into account your specific investing objectives or financial circumstances. Additionally, this article does not look at the macro environment where geopolitical headwinds, internal company changes and individual technicalities in the way a company conducts its business can have a significant impact on a company's long term outlook. Please do your own due diligence before deciding to invest.