These stocks have the best-looking bottom lines in the cannabis industry. Here’s why.
Everyone knows the marijuana industry is booming. Canada’s recreational cannabis market opens later this year. The medical cannabis market in Germany — the largest economy in Europe — is expanding quickly. Thirty U.S. states have already legalized medical marijuana, with nine of them also allowing the legal use of recreational marijuana. More states could follow in their footsteps.
With all of this going on, you might think that marijuana-related businesses would be rolling in profits. But that’s not the case. Most of them remain unprofitable despite the rapid growth of the industry. There are a few companies, however, that are profitable.
Which marijuana stocks are most profitable? Based on trailing-12-month earnings, three stocks with market caps of $200 million or more ranked at the top…
Scotts Miracle-Gro (NYSE:SMG), Aphria (NASDAQOTH:APHQF), and CannTrust Holdings (NASDAQOTH:CNTTF). Here’s what sets these marijuana stocks apart from all the rest.
1. Scotts Miracle-Gro
Scotts Miracle-Gro has emerged as the go-to hydroponics supplier for marijuana cultivators. The company completed several acquisitions over the past few years to solidify its position in the rapidly growing cannabis industry, including its purchase of Sunlight Supply in April. Scotts generated trailing-12-month net income of $219 million, making it by far the most profitable marijuana stock.
There’s one catch with Scotts Miracle-Gro’s solid profits: Most of its money isn’t made from selling to the cannabis industry. In the company’s fiscal 2018 Q3, which ended on June 30, 2018, only 7.5% of Scotts’ total revenue stemmed from its Hawthorne segment, which focuses on the cannabis market. What’s more, Hawthorne has actually operated in the red so far in fiscal 2018.
However, Scotts Miracle-Gro fully expects its Hawthorne business to generate strong profits in the coming years. California, which generates roughly half of the segment’s sales, got off to a rocky start in 2018 with its legal recreational marijuana market. As the kinks are worked out in the state and other large states legalize recreational pot, Scotts should see its marijuana-related profits continue to grow like a weed (pun fully intended.)
2. Aphria
Aphria claims a spot among the top five biggest Canadian marijuana producers. Unlike most of its peers, though, Aphria is…
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