Canopy Growth Corp (WEED)

[MMPRuser]

"to distill the secret of sound investment into three words, we venture the motto - Margin of Safety." Benjamin Graham.

It is a mistake to work backwards (in my opinion), you want to make money so you try to figure out what scenario could make that happen...

(Take total sales *.6 (sales margin) - total expenses) *.8 (20% taxes) = earnings.

last quarter expenses were nearly $30 million, or about $120 a year....if you want to be liberal assume that can remain flat while they expand operations by a couple orders of magnitude.

(.6x - 120,000,000)*.8 = earnings..

so at $200 million in sales * .6 margin = $120 gross margin, - expenses = 0 earnings....

sales number must be over $200 to make any real profit in my opinion....after that you get about half the sales as earnings (with these liberal estimations on expenses, margin and taxes)

so if you want a 10 year pay back - you are looking for another $700 million. Lets add 1.4 billion in sales.

$1.6 billion *.6 = gross margin of $960 million - $120 operating expenses = $840 million - 20% is $672 million annual earnings....

now when considering DCF - the most important aspect is how long will it take to get there, if it happened next year, than this is a buy in my opinion, if it takes 5 years then it is a bad investment...

all of that is working backwards to determine how this would be a good buy at the current price, and I don't think it satisfies my need for a margin of safety. Just my opinion