Smart moves cannabis investors should make this year

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2020 is expected to be a major bull year for cannabis stocks

Investing in the cannabis industry under the current situation might be a tricky business and attention to detail must be paid to make sure the best profit margin is obtained, as well as to ensure no money is lost in the process. There are certain rules that, if followed, minimize the risks in this industry that so far have been rather volatile. Given the fact that the futures look way brighter for this industry on the rise, three things are smart to be considered for investing this year in the cannabis industry.

Starting with what is thought to be the main problem that brought so much pain to the booming cannabis industry, the valuation multiples. For instance, Canopy Growth had a market cap of $17 billion, however, based on the BDS Analytics gave a projection for the entire cannabis industry in just $5.2 billion, and those figures will be reached until later in 2024. A lot of investors bought shares solely of those valuations, which ended being over expectations. The price-to-price ratio might be effective to compare stock prices to one another.

Another good idea is to focus on the company’s income from the operations not really on the net income, as these figures can be easily affected by other factors other than producing more and selling more. It’s always smart to make sure that when a company posts profit margins, extra attention goes to find out if those positive margins come from growing in operations that create more income and not just that some price of an ingredient went down on price, or something similar.

Lastly, but no less important, looking at the company’s cash flow can give an idea of how easy the operations run and how smoothly instead of just getting more and more investors but without producing more. Keeping these ideas in mind when viewing potential cannabis stocks will allow for a more rewarding investment.

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