The marijuana industry consists of companies directly related to the research, development, and distribution of cannabis products, as well as companies that indirectly support these operations. Traditional stock market indices such as the Nasdaq continue to include more companies from the marijuana industry, as a growing number of regions around the world legalize marijuana. The number of U.S. states that permit marijuana use in some form increased to 36 after voters in several states approved marijuana legalization initiatives on their ballots in the 2020 U.S. presidential election.
Some of the Nasdaq-listed marijuana companies include Tilray Inc. (TLRY) and OrganiGram Holdings Inc. (OGI). Many of these companies have managed to maintain fast revenue growth in spite of the COVID-19 pandemic.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), an exchange-traded fund, have significantly underperformed the broader market. MJ has provided a total return of -21.7% over the past 12 months, well below the benchmark Russell 1000 Index’s total return of 26.5%. These performance figures and all statistics in the tables below are as of Dec. 31, 2021.
Here are the top three marijuana stocks on the Nasdaq with the best value, fastest growth, and most momentum.
These are the marijuana stocks trading on the Nasdaq exchange 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.
- GrowGeneration Corp.: GrowGeneration operates retail hydroponic and organic specialty gardening retail outlets. It offers plant nutrition, farming soils, crops, advanced lighting technology, hydroponic and aquaponic equipment, and more. While GrowGeneration is not a pure-play cannabis company, many of its products are used in cannabis cultivation. The company recently announced that it has acquired the assets of Mobile Media Inc. and MMI Agriculture, a mobile shelving manufacturing and warehouse facility, for $9.4 million. GrowGeneration also announced in mid-December the retirement of Tony Sullivan, the company’s executive vice president and chief operating officer (COO).
- Village Farms International Inc.: Village Farms International is a Canada-based agricultural producer. In addition to growing vegetables such as tomatoes, bell peppers, and cucumbers, the company now also produces cannabis. The company announced in mid-November that it has acquired 70% of privately-held ROSE LifeScience for CA$46.7 million ($36.7 million). ROSE LifeScience is a vertically-integrated branded cannabis producer and supplier. It’s an expert in cannabis commercialization, or bringing new products to market.
- Hydrofarm Holdings Group Inc.: Hydrofarm Holdings Group is a manufacturer and distributor of hydroponics equipment and supplies for controlled environment agriculture. Its products include high-intensity grow lights, climate control solutions, growing media, and more. The company announced in early November that it has completed its acquisition of Innovative Growers Equipment Inc., a manufacturer of horticulture benches, racking, and LED lighting systems. The acquisition was announced in late October with a total purchase price of $58.0 million.
These are the top marijuana stocks on the Nasdaq as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and 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 figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
- Hydrofarm Holdings Group Inc.: See company description above.
- GrowGeneration Corp.: See company description above.
- Village Farms International Inc.: See company description above.
These are the marijuana stocks on the Nasdaq that had the highest total return over the last 12 months.
- OrganiGram Holdings Inc.: OrganiGram Holdings’ wholly owned subsidiary, Organigram Inc., is a Canada-based producer of medical and recreational cannabis. Its major focus is producing indoor-grown cannabis. The company recently announced that it has acquired Laurentian Organic Inc., a licensed cannabis producer, for CA$36 million ($28 million).
- Sundial Growers Inc.: Sundial Growers is a Canada-based cannabis producer. The company produces and distributes cannabis for the adult-use and medical market. It offers dried flower cannabis products in various formats, including pre-rolls, oils, capsules, and more. Sundial Growers announced in November that its board of directors approved a new program authorizing the repurchase of up to CA$100 million ($79 million) of its outstanding common shares periodically. The buyback program is scheduled to expire on Nov. 19, 2022.
- Arena Pharmaceuticals Inc.: Arena Pharmaceuticals is a biopharmaceutical company that is developing a diverse portfolio of therapeutic candidates focused on the areas of gastroenterology, dermatology, and cardiology. Some of its drug candidates use cannabinoids. The company announced in mid-December that it has agreed to be acquired by Pfizer Inc. (PFE) for approximately $6.7 billion. Pending approval by regulators, the deal is expected to close in the first half of this year.
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