CRON - Cronos Group: Flush With Cash And Trading Below Book Value

2024-02-11 03:25:29 ET

Summary

• Cronos Group has a cash position of $840 million, which is over 100% of its market cap, and zero debt.
• The company is trading at a discount to book value, with a potential 36% upside if the stock trades in line with book value.
• Cronos Group's operational losses are a factor in the current discount, but the company has seen improvements in revenue and gross profit.

Cronos Group ( CRON ) is flush with cash just as market enthusiasm builds around a potential decision by the Drug Enforcement Administration to move cannabis to a significantly less restrictive schedule, a move that would likely catalyze a broad market rally. The roughly $800 million market cap firm held cash, cash equivalents, and short-term investments of $840 million at the end of its fiscal 2023 third quarter. This is just over 100% of its market cap and is set against zero debt and a revenue profile on the up. I'm not entirely bullish on cannabis but CRON offers a seemingly more favorable risk and reward profile against common shares that are down 11% over the last 1 year, rising to 90% over the last 5 years. The bullish case here is that CRON's depth of cash seems underappreciated by the stock market....

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