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You've probably heard of value traps – seemingly cheap stocks with ridiculously low valuation measures that are anything but. Companies in difficulty with decaying fundamentals may seem inexpensive, but relative to their growth prospects, they can be ridiculously expensive and expose investors to a risk of substantial loss.
What you may not have heard of are actions that seem ridiculously expensive but are actually good deals. I do not know if there is a word dedicated to such stocks, but let's call it a fundamental bear trap, even if the term bear trap actually denotes a technical reason.
One of those securities which, in my opinion, is an expensive security, which is actually seriously undervalued because of its growth prospects, is Aurora Cannabis (TSX: ACB) (NYSE: ACB).
The decisive pillar of cannabis, based in Edmonton, is a fast growing business that few investors (or analysts) can really control. The sector is unclear and valuation is out of the ordinary, but the potential for growth is equally incomprehensible.
Although pot actions are not everyone's cup of tea, I think that names that look well overrated, such as Aurora Cannabis and its multiples of sales multiplied by 43, could be suitable for profitable investors with long horizons. Long-term investment, even if always been a trader's playground.
A weak neighborhood – where was it?
At the time of this writing, Aurora has experienced a more than 10% decline in after-hours business following the release of fourth quarter results, which were below revenue expectations .
Revenues reached $ 98.9 million, missing the Street consensus of $ 108.3 million. Although sales rose three digits from the previous year, investors were a bit too expecting the cornerstone of cannabis, which is on track for profitability.
Management seems optimistic about Aurora's profitability in 2020, but with these changes, many investors seem to think that everything is wrong.
In any case, the quarter was more contrasted than the movement after hours would suggest. The average net selling price of cannabis continues to decline and, even though the stock will continue to be a roller coaster in the coming weeks, the Aurora stock is a good buy as it looks cheap at $ 8 and evolves in relation to its very encouraging growth. neglected prospects and progress made during the last quarter.
Certainly, there is uncertainty on the horizon, but as the industry evolves, I consider Aurora as one of the market leaders that will post a three-figure growth in medium term and strong double-digit growth in the very long term. International taboo on cannabis fades slowly but surely.
After losing nearly half of its value, Aurora Cannabis is ultimately a valuable investment and not a speculation that fools should feel confident in their purchases after the decline in profits.
Take away
A tiny small cap to bet on Cannabis 2.0 on October 17th …
The first wave of legalization of cannabis has hit the millionaires of ordinary investors, and this could be about to recur.
Because when food products will be legalized in Canada on October 17, experts predict that a new $ 2.7 billion market will emerge.
Our last choice of legalization shares is already up 1,211%, and we now recommend a tiny small cap title before Cannabis 2.0.
This could be our next + 1000% winner in the cannabis space.
Hurry up, the second wave of cannabis legalization is about to hit and this stock could skyrocket.
Click here to find out more!
Joey Frenette, idiotic contributor, has no position in the mentioned actions.
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