Article by Caleb McMillan, Cannabis Life Network
Investors have pushed up Canopy’s stock price more than 850 per cent because they expect Canopy to be the Wal-Mart of cannabis. But they’ve also pushed up the stock because it’s considered a safe haven in a sea of chaos. Virtually every stock has gone up in the last ten years.
Investors trade their hard-earned savings for shares of a (hopefully) successful, well-managed business.
That’s what stocks represent – ownership interests in businesses. So investors are ultimately buying a share of a company’s net assets, profits, and free cash flow (i.e. the money available to pay out to shareholders).
But is that what the current stock market represents? Is that what Canopy’s $5.5 billion market cap represents? A well-managed business?
In 2006, Exxon Mobil reported $365 billion in revenue, profit of nearly $40 billion and free cash flow of $33.8 billion. At the time, the company had $6.6 billion in debt.
Ten years later, Exxon’s full-year 2016 revenue was $226 billion, net income was $7.8 billion, free cash flow was $5.9 billion and the company had a staggering debt of $28.9 billion.
Compared to its performance in 2006, Exxon’s 2016 revenue dropped nearly 40%, due to the decline in oil prices. Profits and free cash flow collapsed and debt skyrocketed.