It has been a wild ride for marijuana investors. The industry is still in its infancy, and as such, investors can expect continued volatility. Now well off their 52-week highs, it may be time to look at re-investing in the sector.
It’s important to note, however, that most are still not yet profitable. Likewise, despite the recent downtrend, many are still trading at sky-high valuations. When looking at what pot stocks to invest in, there are a few criteria investors should take into account.
First, you need to have trust in management. The industry has been negatively impacted by some suspect activity. Investors need to believe that management has shareholders’ best interests in mind. Second, look for a clear path to profitability. In the next couple of years, those that can’t make a profit will be left behind. Finally, look at valuation ratios such as price-to-sales and enterprise value (EV) to earnings before interest, taxes, depreciation, and amortization (EBITDA).
With that in mind, my top marijuana pick for 2019 is CannTrust Holdings (TSX:TRST).
Top marijuana stock performer
In the past quarter, CannTrust has been a middle-of-the-pack performer. This might doesn’t much considering that the majority of industry players have been clobbered. The Canadian Marjuana Index is down almost 40% in the past quarter. In comparison, CannTrust is down 42%.
Best-valued marijuana stock
Not only is management trustworthy, but the company is also one of the best-valued pot stocks. Trading at only 5.22 times 2019 sales, it is one of the best bargains in the industry. The company is also profitable and is only trading at a price to forward earnings of 25.7. This is cheap when you consider revenue and earnings per share will grow by triple digits over the next couple of years.
