You've probably heard of value traps – seemingly cheap stocks with ridiculously low valuation scales that are anything but good. Impaired companies with declining fundamentals may seem cheap, but they can be absurdly expensive relative to their growth prospects and expose investors to a significant downside risk.
What you may not have heard are stocks that seem ridiculously expensive, but actually shout bargains. I am not sure if there is a word for such stocks, but let's call it a fundamental bear trap, though the term bear trap is actually a technical pattern.
Such a stock, which I believe is an expensive-looking stock, which is heavily undervalued given its growth prospects. Aurora Cannabis (TSX: ACB) (NYSE: ACB).
The Edmonton-based Cannabis Kingpin is a fast-growing company that few investors (or analysts) can imagine. The industry is hazy and the valuation is out of this world, but the growth potential is equally unfathomable.
While pot stocks are not for everyone, I believe such names as Aurora seem overvalued Cannabis, with its 43.6x revenue multiplier, may be suitable for value investors with a long-term investment horizon, although stock trading has always been a playground for traders.
A weak quarter ̵
1; or was it?
At the time of Aurora, after-hours trading fell more than 10% after fourth-quarter results were below expectations.
Revenues increased to $ 98.9 million and missed the street consensus of $ 108.3 million. Although sales rose three digits year-on-year, investors expected a bit too much of the cannabis kingpin, which is on track for profitability.
Management seems optimistic that Aurora is on track To be profitable in 2020, however, many investors seem to believe that it is just smoke and mirrors.
In any case, the quarter was more mixed than the post-move move would suggest. The average net selling price of cannabis continues to decline and while the stock will be a rollercoaster ride in the next few weeks, the Aurora stock is a strong buy as it looks cheap at $ 8 and is changing prospects and overlooked progress relative to its very encouraging growth in the last quarter.
Yes, there is some uncertainty, but as the industry matures, I see Aurora as one of the market leaders, achieving triple-digit growth in the medium term Long-term high double-digit growth, as the international taboo on cannabis is slowly but surely waning ,
After Aurora cannabis has lost almost half of its value, it is finally an investment and no speculation that Fools should feel safe buying the fall after the gain.
Dumb take away
A tiny small-cap stock to bet on before October 17, Cannabis 2.0 …
The first wave of legalization of cannabis has shaped millionaires by everyday investors , and it could happen again soon.
For when edible goods are legalized in Canada on October 17, experts predict a new $ 2.7 billion market will be created.
Our last selection of legalization shares has already risen by 1,211%, and now we're recommending a tiny small-cap stock ahead of Cannabis 2.0.
This could be our next + 1,000% winner in cannabis space.
Hurry! The second wave of legalization of cannabis is imminent and this stock could skyrocket.
Click here to find out more!
The fool player Joey Frenette has no position in any of these stocks.