Home Cannabis Why Analysts Expect Aphria's Margins to Expand

Why Analysts Expect Aphria’s Margins to Expand

Margin expansion

Aphria’s (APHA) sales are expected to increase ~350% in the second quarter of 2019. Analysts expect the sales to impact the company’s EBITDA margins as well.

Aphria's EBITDA Margins Actuals and Estimates 2019-01-02

EBITDA margins

Aphria’s EBITDA margins are estimated to expand to 16% in the second quarter—compared to negative margins of 4% in the same quarter in 2018. Increased sales appear to be the key driver in the company’s margin expansion—compared to cost optimization.

Most cannabis companies (HMMJ) including Canopy Growth (WEED), OrganiGram (OGRMF), and HEXO (HEXO) are all in the growth stage and investing heavily in operations. Cost optimization usually comes at a later stage when the industry gets fairly mature and the growth flattens.

Aphria has also been investing heavily to expand its operations. The company increased its capacity to grow cannabis and completed acquisitions in international markets, which have been criticized by Hindenburg Research. To learn more, read Aphria Continued to Fall despite the Company’s Defense and Aphria: Last Week Was Eventful.

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Next, we’ll discuss Aphria’s EPS expectations.

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