When a company releases its earnings report, two main items are typically the focus for analysts and investors -- revenue and earnings. While those are important numbers to keep an eye on, they may not be the most important, especially in the cannabis industry.
Revenue growth is important, but for companies to continue operating and growing, they need to be generating cash. That's why investors should always start with the statement of cash flow when assessing whether a stock is a good investment or not. In particular, one item should be the focus.
At a minimum, a company should be generating positive cash flow from its day-to-day operations. If it's not bringing in more cash than it's spending, that's where investors can expect to see debt or equity issues and cuts to expenses, including job cuts. The severity of these decisions will depend on the long-term trending of operating cash flows. Working capital, for instance, can skew the numbers during a period if a company paid a lot of its liabilities down.