Investors looking for the best cannabis stocks may be curious whether any of the more high-profile names are buying opportunities. After all, since the sector fell out of favor, once-popular plays like Canopy Growth (NASDAQ:CGC) and SNDL (NASDAQ:SNDL) have fallen to rock-bottom prices. But after some digging, I found some that could see higher highs.
In fact, these companies, most of which are profitable on at least an EBITDA basis, may have the ability to move higher, thanks to numerous company-specific catalysts rather than one large legislation-based catalyst. So, if you’re bullish on the sector, these are the seven best cannabis stocks to buy this month.
|Green Thumb Industries
|Innovative Industrial Properties
|Turning Point Brands
Cresco Labs (CRLBF)
Cresco Labs (OTCMKTS:CRLBF) is a vertically-integrated cannabis company, involved in branded products, wholesale distribution, as well as the operation of state-licensed dispensaries. It operates in 10 U.S. states, including populous states like Illinois, Massachusetts, and Pennsylvania. Per the company’s latest financials, Cresco continues to report steady revenue growth and currently has positive operating cash flow. There is a pending catalyst that could drive share price growth for CRLBF stock in the future, making it one of the best cannabis stocks to buy today. That would be Cresco’s pending acquisition of Columbia Care (OTCMKTS:CCHWF).
Management has recently stated that it expects this transaction to close by June 30. As InvestorPlace’s Muslim Farooque argued back in Dec., the announced merger could make Cresco Labs the largest footprint among vertically-integrated state operators.
Green Thumb Industries (GTBIF)
Green Thumb Industries (OTCMKTS:GTBIF) is another large, vertically-integrated cannabis purveyor, licensed on the U.S. state level. The company produces a plethora of recreational and medicinal cannabis products and operates 77 retail locations across 15 states.
Last Year, Green Thumb generated $1 billion in revenue, reporting high figures for both adjusted operating EBITDA ($311 million) as well as operating cash flow ($159 million). Despite the strength of having higher operating margins, GTBIF stock (on an EV/EBITDA basis), trades at a relatively low valuation.
According to Seeking Alpha, GTBIF has a trailing twelve-month EV/EBITDA ratio of 6.5. By comparison, CRLBF trades for 8.3 times trailing EBITDA, and another peer, Curaleaf Holdings (OTCMKTS:CURLF), trades for 10.6 times trailing EBITDA. As more investors become aware of the value of Green Thumb, this valuation gap could narrow, resulting in gains for shares.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is not a cannabis stock per se. This entity does not cultivate cannabis or cannabis products, and it doesn’t operate retail dispensaries. Still, it’s one of the best cannabis stocks out there.
Why? As a real estate investment trust (or REIT) that leases out properties to state-licensed cannabis growers, IIPR stock is a way to immediately profit from this trend. With the income from its real estate portfolio, this REIT pays a hefty dividend of 10.35%. As I discussed in a recent article about REIT stocks, there have been some red flags with IIPR, such as a declining rent collection rate.
However, besides IIPR’s super-high yield helping to make up for this elevated level of risk, it continues to diversify its tenant base. Numerous other catalysts, like lower interest rates and/or federal legalization progress, could also spark a big rebound for the stock.
Based in Massachusetts, Marimed (OTCMKTS:MRMD) is another integrated multi-state cannabis operator. In contrast to the two multi-state operators listed above, Marimed not only is profitable on an adjusted EBITDA basis. In both 2021 and 2022, the company reported positive earnings per share (or EPS).
While Marimed is pursuing growth opportunities, organic as well as mergers and acquisitions (or M&A), one can argue that the company is a takeover target itself. A rival operator could pay a premium for MRMD stock, and still wind up with a deal that is both accretive to earnings, and results in cost savings/other synergies.
Although takeover potential isn’t always the best reason to buy a particular stock, this, along with the stock’s low valuation, may make MRMD a strong opportunity for valuation-conscious investors looking to add cannabis exposure to their portfolios. Clearly oversold, consider it a buy.
POSaBIT Systems (POSAF)
PoSaBIT Systems (OTCMKTS:POSAF) is another “cannabis-adjacent” stock that I have recommended in past coverage. Last Oct., I argued that the company, a payment processor for dispensaries, had big growth potential, as the lack of federal legalization kept larger payment companies out of the space.
Since making this recommendation, POSAF stock has moved higher, from 53 cents to 76 cents per share. Yet while it’s already produced a nice profit for investors who bought it six months back, further runway likely remains. Alongside organic growth, the company is also expanding its business through acquisitions.
A high-potential deal to acquire several cannabis payment processing/software companies fell through, but PoSaBIT has another bolt-on purchase in the works: one of its longstanding peers, Hypur. This consolidation could result in improved operating results for POSAF going forward. In turn, this could send the stock back toward prior price levels (over $1 per share).
Turning Point Brands (TPB)
Admittedly, calling Turning Point Brands (NYSE:TPB) one of the best cannabis stocks is more of a stretch than it is with IIPR and POSAF. Turning Point is largely known as a tobacco company, manufacturing and selling smokeless tobacco under the Stoker’s brand.
However, TPB is also heavily-exposed to the cannabis space. The company also markets/distributes Zig-Zag rolling papers. In fact, Zig-Zag is its largest operating segment by sales. Originally created for roll-your-own cigarettes, for generations Zig-Zag papers have also been used for cannabis consumption.
The company’s overall performance in 2022 was hurt by sluggish sales and rising costs. This has of course resulted in a poor performance in the past year for TPB stock. Still, with Zig-Zag reporting steady sales and market share growth, Turning Point could surprise as 2023 plays out. Trading for less than 9 times earnings, consider it one of the best cannabis stocks.
Village Farms International (VFF)
Village Farms International’s (NASDAQ:VFF) legacy business is in greenhouse vegetable production, in both Canada and the U.S. In more recent years, however, the company has expanded into the greenhouse production of cannabis. Village Farms also has exposure to the CBD wellness space, through its wholly-owned Balanced Health Botanicals subsidiary.
Thus far, these efforts to “go green in another way” have yet to result in big success. VFF has reported negative earnings for each of the past five years. So then, what’s the appeal of VFF stock? While past and current performance has been lackluster, much stronger results may lie ahead.
As the company’s higher-margin cannabis segment continues to gradually become its main business, overall results will improve. In the event of full U.S. cannabis legalization, VFF stands to win big. Why? The company’s Texas greenhouse operations (now used for vegetable production) could then be converted for cannabis production.
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On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.