Canopy Growth has been the market leader since it was the first publicly traded cannabis company in Canada. It has continued to lead, earning some of the highest returns for investors and leading the charge to expand internationally.
There are, however, two companies that have not been far behind throughout the process. Now, as Canopy is stalling, there is an opportunity for them to catch up and possibly take over the position of market leader.
These companies have managed their finances well, have built up low-cost operations, and have made large export deals with international countries.
OrganiGram is a Canadian cannabis producer headquartered in Moncton. It has been a top company from day one, even though it hasn’t gotten as much spotlight as some of its peers.
It’s one of only four companies to get sales agreements with all 10 provinces and is one of the only companies that has partnered up with celebrities, through its deal with the Trailer Park Boys.
It’s been increasing its production capacity, targeting a total capacity of 113,000 kg when it finishes Phase 4C of its expansion, which should be completed by the end of the year.
It has a unique three-level facility for cultivation that is located in Moncton. The three-level design has numerous advantages, but, most importantly, it maximizes OgraniGram’s footprint. It’s also using cutting-edge data to help drive decision making.
The company has many growth opportunities and has been focusing on the next phase of legalization using data based on U.S. information. This has led it to focus mainly on vape products and edibles, including beverages.
The company reported positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in the third quarter. This was the fourth quarter in a row it had positive adjusted EBITDA. The adjusted EBITDA margin was an impressive 31%.
The company has a super low all-in cost of just $1.29 per gram, which allows it to be highly competitive. In addition, it has been managing its finances well and is financially sound. At the end of the third quarter, it had debt of less than $50 million against cash and short-term investments of nearly $90 million.
The company is trading for less than $1 billion, and the stock has tons of value below $6 a share.
Aphria is one of the largest licensed producers in Canada with a market cap over $2 billion.
It’s been busy the last few years, building its numerous brands, expanding its production facility phases, and signing tons of deals all around the world.
On the recreational front, Aphria has agreements with all 10 provinces, as well as the Yukon. This gives it access to 99.8% of Canadians. On the medical side, it’s one of the only companies that has made a deal with Shoppers Drug Mart as well as continuing to do its direct-to-patient sales through e-commerce.
Its operations are truly global with partnerships in 10 countries and on five continents. The cannabis landscape continues to change globally, and Aphria is taking full advantage.
Furthermore, it has a huge runway for growth with its plans in Germany for the medical market. Germany is one of the best medical markets to get into due to its large customer base and insurance-sponsored medical cannabis program. This makes it one of the top international markets that companies are going for.
In the three months ended May 31, the company did over $125 million in sales with an adjusted gross margin of about 22%.
The stock is trading around $8.50, offering investors a huge discount while it stays under $10.
Both companies have huge growth opportunities, are low-cost producers, have good capital management, and are trading at rock-bottom prices. If you are looking for the next stock to lead the industry, you can’t go wrong with Aphria or OrganiGram.
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Fool contributor Daniel Da Costa has no position in any of the stocks mentioned.