How Risky an Investment Is Trulieve Cannabis?
Trulieve Cannabis (OTC: TCNNF) has generally been one of the safer cannabis producers in the industry to invest in. Strong sales coupled with consistent profits in each of its past four quarters have helped the company stand out from its marijuana industry peers. However, when a short-seller report came out last month that underlined some concerns about the company and its connections, it put Trulieve in the spotlight for all the wrong reasons. And although that report may be biased and contain inaccuracies, there are concerns that investors should have about buying the company's stock today.
Cash is a sensitive topic in the cannabis industry these days. Many pot producers are burning through money and don't have much on their books. Trulieve, unfortunately, is no exception. Although the company is profitable, its free cash flow for the past 12 months was negative $49 million.
Meanwhile, it had just $31 million in cash on hand as of Sept. 30 -- a cushion that may not last long given that in its most recent quarter its free cash flow was negative $25 million. The company could take on more debt or issue more shares to generate operating capital, but these tactics can't be used over the long term as too much share dilution could send the stock into a tailspin. And with Trulieve expanding into new markets in California, Connecticut, and Massachusetts, its need for cash will only be increasing, making it even more important that it doesn't burn through too much money in its day-to-day operations.
Source Fool.com
