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There are some things to like about Aphria (NASDAQ:APHA). Aphria stock is relatively cheap by the standards of the cannabis sector. And the company is profitable, at least on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis.

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The balance sheet isn’t in bad shape. Aphria closed its fiscal fourth quarter (ending May) with nearly 100 million CAD in cash net of debt.

Aphria stock even has performed reasonably well in 2020, at least by the standards of a sector that has struggled. APHA has declined just 1.5% year-to-date. Many other cannabis stocks have done far worse.

The problem is that there’s nothing really to love about Aphria stock. It’s not a stock that I recommend to my Cannabis Cash Weekly subscribers — because it’s not a case that I find compelling.

On every metric, there are rivals that do things a bit better than Aphria. Combine that with the overhang of a past scandal, and it’s too hard to pound the table too aggressively for APHA stock.

The Positive Attributes

Across the board, Aphria’s performance is solid, but not spectacular.

In Q4, for instance, gross revenue for adult-use cannabis rose 27% quarter-over-quarter. For the full year, total cannabis revenue more than doubled.

That’s better than most, but not all, Canadian cannabis plays.

In terms of total revenue, CC Pharma, a German distributor that Aphria acquired at the beginning of last year, skews the numbers somewhat. Still, Aphria is larger than most– not all — rivals in Canada.

Looking at the balance sheet, risk looks modest. Again, the company has enough cash to retire its debt. That’s not something every cannabis company can say right now. With the regulated market still facing licensing backlogs and ‘black market’ competition, some cannabis producers are facing a significant risk of bankruptcy. Aphria is not one of those producers.

Most notably, Aphria is generating profits (sort of). Adjusted EBITDA isn’t the same as net profit, but there is a business here that investors can value based on traditional profitability metrics.

All told, Aphria stock doesn’t have the worst bull case in cannabis.

Looking Closer

But if you look closer, it’s tough to make the argument that Aphria has the best bull case.

A good chunk of revenue, for instance, still comes from cannabis production. And though Aphria has driven down cash costs below 1 CAD per gram, that’s still not a hugely profitable business. Nor am I convinced that Aphria’s adult-use brands, including Solei and Riff, are set to lead the market.

The balance sheet offers some concerns as well. Aphria does have more cash than debt, but that debt still carries significant interest expense. Interest far exceeds EBITDA, which drives negative free cash flow and is leading the company to sell stock “at the market” to raise capital.

Those ATM sales show that Aphria isn’t out of the woods (or the greenhouse) in terms of its financial position. More importantly, the balance sheet isn’t strong enough for the company to get aggressive in buying up assets and/or expanding into new markets.

On top of it all remain management questions. It’s true that the leaders who executed some questionable acquisitions are gone. Current CEO Irwin Simon has respect within the industry and a strong track record.

But the board of directors is largely unchanged and Aphria is still saddled with the assets it purchased, and the debt taken on to purchase them. I don’t think investors can simply ignore that history.

Is Aphria Stock Compelling Enough?

The cannabis industry has gotten off to a slower start than many predicted, there’s no doubt about it. But I still am a huge believer in the industry’s long-term opportunity.

We will see more markets open up over time. I believe that will include the U.S. The benefits of legalization are too immense for governments to ignore them forever.

In playing that long-term opportunity, I’d like to own the companies that can lead, and even dominate, in those markets. And I’m simply not convinced Aphria will be one of those companies. Near-term profitability is fine, but it’s the long-term profile that truly matters.

On that front, Aphria simply doesn’t seem to have enough. And so I’d look elsewhere in the cannabis sector for the truly huge opportunities.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.