Global cannabis-lifestyle consumer packaged goods company Tilray Brands, Inc. (TLRY) in Nanaimo, Canada, operates through four segments: cannabis business; distribution business; beverage alcohol business; and wellness business. The company supports more than 20 brands in more than 20 countries, including comprehensive cannabis offerings, hemp-based foods, and alcoholic beverages. TLRY has been expanding its portfolio with significant product launches and with its recent partnership with HEXO Corp. (HEXO), seeking to improve production efficiencies and strengthen its position amid a competitive market.

Shares of the cannabis producer have been gaining momentum lately on hopes of cannabis decriminalization. The recent buzz that U.S. House Democrats are set to pass legislation this week to legalize marijuana at the federal level has boosted the stock. TLRY has gained 55.7% in price over the last week. If the Marijuana Opportunity Reinvestment and Expungement Act is advanced, removing cannabis from the list of federal controlled substances and eliminating criminal penalties should boost cannabis producers' prospects. The legislation requires 60 votes, including the support of at least 10 GOP senators if every Democrat backs it to advance. However, some experts are skeptical about the passage of the bill. According to Michael S. Lavery, a senior research analyst at Piper Sandler, the marijuana bill is 'unlikely to pass the Senate in its current form.' "It still requires 60 votes in the Senate, a level of support we do not believe it has," he stated.

TLRY has slumped 63.8in price % over the past year and 31.3% over the past six months to close the last trading session at $7.99. The stock has gained 13.7% year-to-date.

Here is what could shape TLRY's performance in the near term:

Poor Profitability

TLRY's 23.19% gross profit margin is 58.4% below the  55.68% industry average. Also, its 3.85% and 46.67% respective EBITDA and net income margins are substantially lower than the 4.95% and negative 2.15% industry averages. Furthermore, TLRY's ROE, ROA, and ROTC are negative 9.33%, 4.77%, and 2.51%, respectively.

Reported a Comprehensive Loss in its Last Reported Quarter

For the fiscal second-quarter, ending Nov. 30, 2021, TLRY's net revenue increased 19.8% year-over-year to $155.15 million. However, its gross profit declined 7.1% from its year-ago value to $32.77 million, while its operating loss came in at $54.68 million, indicating an increase of 110.6% year-over-year. The company reported $5.80 million in net income and a zero EPS, compared to the prior-year quarter's net loss and net loss per share of $89.25 million and $0.41, respectively. But its comprehensive loss stood at a negative $42.88 million, reflecting a $90.16 million improvement from its year-ago value.

Unfavorable POWR Ratings

TLRY has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a C grade for Growth, which is consistent with its mixed financials in its last reported quarter.

TLRY has an F grade for Momentum. The stock's more than 60% decline in share price over the past year justifies this grade. It is currently trading below its 200-day moving average.

Among the 175 stocks in the F-rated Medical – Pharmaceuticals industry, TLRY is ranked #139.

Beyond what I have stated above, one can view TLRY's grades for Sentiment, Stability, Value, and Quality here.

View the top-rated stocks in the Medical – Pharmaceuticals industry here.

Click here to checkout our Healthcare Sector Report for 2022

Bottom Line

TLRY is focusing on innovation and expanding its market share as cannabis legalization is accelerating worldwide. It has made an impressive return to profitability in its last reported quarter, but the sustainability of its profitability is in question at this point. TLRY's shares advanced last week on legislation hopes. However, considering its significant comprehensive loss and negative margins, we think it could be wise to avoid the stock.

How Does Tilray Brands, Inc. (TLRY) Stack Up Against its Peers?

While TLRY has an overall POWR Rating of D, one might want to consider investing in the following Medical – Pharmaceuticals stocks with an A (Strong Buy) rating: Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), and Bristol-Myers Squibb Co. (BMY).

TLRY shares fell $0.13 (-1.63%) in premarket trading Tuesday. Year-to-date, TLRY has gained 13.66%, versus a -3.71% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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