There’s no denying the fact that cannabis stocks have fallen on hard times. Challenges primarily at the retail level—such as a lack of dispensaries, unnecessarily burdensome regulations, and a rapid erosion of investor trust—have led the industry to fall short of its full potential.
But even as the Canadian Marijuana Index dips dangerously close to the sub-$200 mark—down nearly 80% from its all-time high two years ago—there are reasons for investors to remain optimistic.
Why 2020 Will Be Better for Cannabis Stocks
Several important catalysts, such as the diversification of cannabis products and the international legalization movement, promise to make 2020 a better year for the cannabis industry than 2019 was. Likewise, 2021 will probably be an even better year than that.
Still, while next year may be the bulls’ best chance to run free, that doesn’t mean poorly performing stocks will suddenly turn around. As they wait for the industry outlook to improve, investors should consider watching the companies that are already growing revenue.
Essentially, if a cannabis stock can go green before the market picks up, it’s possible that it will do gangbusters afterwards. So, let’s take a look at some of the industry-leading companies in terms of profit and revenue growth.
Cannabis Stocks: MediPharm Labs ($3.44)
Through its GMP and ISO certified laboratory, MediPharm Labs Corp. (TSX:LABS) (OTCQX:MEDIF) produces purified, pharmaceutical-like cannabis oils and concentrates.
The company’s 70,000 square-foot facility currently has a production capacity of 250,000 kg. This gives it the largest extraction-only footprint in Canada, and that’s even before it can execute its plan to is expand production to 250,000 kg.
In May, MediPharm Labs began supplying $30 million worth of cannabis concentrate to another cannabis stock, Cronos Group (TSX:CRON) (NASDAQ:CRON). The deal will last for 18 months but can be expanded to $60 million over 24 months.
The company is also making headway in the potentially lucrative Australian market. It recently completed initial construction of its specialized extraction facility in the country.
According to MediPharm’s most recent quarterly report, it earned $43.4 million in revenue with adjusted operating income of $5.4 million. This gives it the fourth-highest income in the entire industry.
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Cannabis Stocks: Valens GroWorks ($3.00)
Like MediPharm, Valens GroWorks Corp (TSXV:VGW) (OTCQX:VGWCF) is a Canadian extraction company. Also like MediPharm, the company benefits from a major supply deal with a cannabis giant.
In June, it upgraded its multi-year agreement with Tilray (NASDAQ:TLRY) to supply 60,000 kg of dried cannabis and hemp biomass. It also has supply agreements with Organigram Holdings (TSX:OGI) (NASDAQ:OGI), HEXO Corp. (TSX:HEXO) (NYSE:HEXO), and Canopy Growth Corporation (TSX:WEED) (NYSE:CGC).
Like many cannabis stocks, Valens is making a play for the cannabis consumables market. Last month, it acquired Pommies Cider Co, which is based in Ontario. This will accelerate the company’s entry into both the beverages and edibles market in Canada.
As discussed last month, Valens recently posted net income of $5.9 million CAD. That’s a great turnaround from its net loss of $10.5 million CAD in the previous quarter. Thanks to this, the company narrowly beats MediPharm to become the highest earner in the cannabis industry.
Cannabis Stocks: Trulieve ($12.45)
Trulieve Cannabis Corp. (CSE:TRUL) (OTCQX:TCNNF) is the largest fully licensed medical cannabis company in Florida. It cultivates and produces all of its products in-house and distributes those products to its own stores. In addition to Florida, it also operates in California, Massachusetts, and Connecticut.
In its Q3 earnings report, the company posted sector-leading revenue of $70.7 million. That’s a quarter-over-quarter increase of 22%, which was largely driven by growth in its Florida operations.
On top of that, Trulieve’s $23.4 million in operating income is the best the cannabis has seen yet.
As we approach the new year, make sure to keep an eye on New Cannabis Ventures’ Revenue & Income Tracker. This will make sure you’re keeping your portfolio filled with only the best picks.
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