Cannabis stocks are climbing higher today after voters expanded the use of marijuana in several states. It can be challenging to discover good stocks in the cannabis industry because much of the news and research is focused on the big names like Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGT).
I found myself asking, “Where are some good cannabis growth stocks.” After some research, I quickly found out that this industry is very risky. However many investors ignore smaller weed stocks that they might not get as much attention but give them a good value. Below are three stocks in the “green” sector, which may be good buys year.
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Aphria (NYSE: APHA)
With a market cap of approximately $1.1 billion, Aphria is one of the most larger weed stocks on the market. However, the stock often does not benefit from the same growth as Canopy Growth and Aurora. It only trades three times income/revenue, which means that investors have less value than the nine times for Aurora’s stock. It looks even better Canopy’s 26 times price-to-sales.
What makes Aphria as an exciting option for investors is sales. It had sales of 449 million Canadian dollars in the past 12 months and generated far more than four quarters than Aurora. Aphria also recorded more revenue than Canopy Growth.
In reviewing the profits in two of the previous three quarters, Aphria produced some compelling numbers, specifically the income statement. It was more challenging to achieve a break-even for both Canopies and Aurora. Despite its better financial numbers, Aphria stock still fell 58% in the last 12 months. While this is not as bad as a drop of 76% Aurora during that time, the Canopy stock failed less, with a smaller decline of 53%.
This year could be a good year for Aphria stock as the market in edibles in Canada to help the company produce stronger results in 2020. And with a low valuation, there is a high chance of increasing the stock, especially if the company can stay in the black.
iAnthus (OTC: ITHUF)
The US-based IAnthus Capital Holdings has a market cap of a little over $200 million. It only recorded a modest sales of $53 million over the 12 months. IAnthus stock trade at four times revenue. Thus investors are valuing it less than the big-name pot stocks in the industry.
IAnthus reportedly only operates about 30 dispensaries. However, the company’s tetrahydrocannabinol (THC) products in more than 190 stores and its cannabidiol products (CBD) are in over 2,300 stores nationwide. iAnthus is in several states and growing. It announced in 2020 that New Jersey had been allowed them a permit, and Massachusetts also allowed them to start operating activities in the state.
With a growing footprint in 10 states, including hot markets such as California, Florida, and Massachusetts, the iAnthus could see a lot of growth in 2020. The weed market is small today but is expected to grow substantially in the near future. iAnthus stock has taken a beating recently, but it could quickly bounce up.
Green Thumb (OTC: GTBIF)
Green Thumb Industries is a lot further ahead than iAnthus with $ 161 million in sales to the last 4 quarters. The US-based company opened its seventh store in Illinois on January 31, which was on the 41st country in the country. It expects it to benefit from a home-state advantage as Illinois made weed legal January 1.
Market analysts are projecting that the Illinois market could be as big as $2.5 billion matured. Green Thumb has a huge chance of success because they are one of the first companies to move in the state.
The negatives to Green Thumb is that is has struggled with profitability. Its latest quarterly results released in November, the company achieved positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $14.1 million.
Another challenge for Green Thumb is that it is not as cheap as the other stocks on this list. Currently, it is trading at more than 11 times its sales. But this can change rapidly as the company now benefits from significant sales growth in 2020 as it is growing rapidly in other states.
Green Thumb plans to release its 2019 year results on March 26. Over the past 12 months, its stock price has dropped by 37%.
Any investment has risks. However, weed stocks carry more risk because it is a new market with serious legislative and market issues. Also, we see a lot of “hype” that is very similar to the “tech boom” of the 2000s.