These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth, which remained strong despite the economic disruption caused by the pandemic.
These are the top marijuana stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
Best Value Marijuana Stocks
On March 31, 2021, New York passed a law legalizing recreational cannabis, expanding medical use, and decriminalizing possession of small amounts of marijuana, among other measures. Not all of these provisions will go into effect immediately and there is no timeline yet on when all these measures will be fully implemented.
Only one of the companies listed below reported positive EPS growth in the most recent quarter.
Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks which have outperformed the market will often continue to do so, because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the last 12 months.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have outperformed the broader market. MJ has provided a total return of 61.8% over the past 12 months, above the Russell 1000 index’s total return of 43.5%. These market performance numbers and all statistics in the tables below are as of June 25, 2021.
Investors who opt to buy individual medical marijuana stocks can choose Canadian or U.S. companies. Because marijuana is currently illegal at the federal level in the U.S., companies with operations that violate those laws can’t be listed on the major U.S. stock exchanges. However, their stocks are traded on less-regulated over-the-counter (OTC) markets and, in some cases, on smaller Canadian stock exchanges.
Florida’s medical marijuana market is in its early stages and presents a major growth opportunity. The company also hopes to expand in the U.S. and leverage its initial operations in other states that have fast-growing medical marijuana markets.
Trulieve Cannabis is a vertically integrated U.S.-based cannabis company that grows medical cannabis and distributes products to its retail dispensaries. The company’s primary operations are in Florida, where it runs 70 medical cannabis dispensaries. Trulieve also has operations in California, Connecticut, Massachusetts, and Pennsylvania.
How to invest in medical marijuana stocks
REITs present an attractive option because their risk is spread across multiple tenants. Even better, the government mandates that REITs must distribute at least 90% of their taxable income to investors in the form of dividends. Innovative Industrial Properties has plenty of taxable income, thanks to its consistent profitability.
As a real estate investment trust, or REIT, Innovative Industrial Properties is the leading real estate provider for the U.S. medical cannabis industry.
Epidiolex is the company’s primary growth driver and should pick up tremendous momentum with a new approved indication in the U.S. for treating tuberous sclerosis complex. GW also hopes to win regulatory approvals in the U.S. and Europe for additional cannabis-based products.
Valens is a Canadian cannabis extraction services provider that has multiyear extraction agreements with Canadian growers, including Canopy Growth, HEXO, OrganiGram, and Tilray.