Forget Aurora (TSX:ACB) Stock: 2 Pot Stocks That are Way Cheaper

Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) continues to remain overvalued. If you are looking to add a high-quality pot stock, consider these two long-term cannabis companies.

| More on:
edit Jars of marijuana

Image source: Getty Images

Aurora Cannabis Inc (TSX:ACB) has been an investor favourite since the early days of pot stock trading. Besides Canopy Growth Corp, there is no bigger pot stock when it comes to market cap or popularity among investors.

That popularity makes sense given the long-term prospects Aurora has created. The firm has established itself as one of the biggest and most dominant companies in the industry.

The only problem is that Aurora may have over-estimated the Canadian marketplace and over-extended itself. Its share price has been consistently falling for about a year now. It’s also a reason why Aurora needed to cancel some planned developments, in order to save cash. Funding is scarce in the industry today.


At the end of January, when it was trading at around $30, I called for Canopy to be worth just $15. Since then, the stock has come down roughly 30%. This week, the company announced it was laying off roughly 500 workers. Aurora is in a very similar position to Canopy and is still priced extremely high, with a price-to-sales ratio over 7 times.

The consequences of over-extending themselves to become dominant in the industry are now becoming clear. The industry continues to shift in favour of companies that took a more conservative approach to the market.

If you believe there is still money to be made in the industry, two of the top stocks to buy today are Aphria Inc (TSX:APHA)(NYSE:APHA) and OrganiGram Holdings Inc (TSX:OGI)(NASDAQ:OGI).


OrganiGram is one of the most attractive cannabis stocks on the TSX. The company has a market cap of less than $500 million and a reasonable price-to-sales ratio of 5.2 times.

Its valuation is also reasonable, especially when you consider its capacity to produce high-quality bud in state-of-the-art cultivation facilities.

The company is one of the best at producing cannabis for the medical and adult-recreation markets, as evidenced by its deals with all 10 Canadian provinces.

It managed to grow revenue year over year by more than 500% in fiscal 2019, and had an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of roughly 25% of its net revenue.

These are impressive numbers for OrganiGram and bode well for its future. Investors can relax knowing that the stock isn’t overvalued like a number of its peers.


Aphria has an even more attractive valuation than OrganiGram, and certainly a lot cheaper than Aurora with a price-to-sales ratio of just 2.9 times.

The company also has distribution in all 10 provinces. It is currently in more than 500 stores nationwide, and growing by the month.

Aphria has also been searching for medical opportunities around the world, positioning itself for major growth in international markets.

Another thing that makes Aphria so attractive and much better positioned than a number of its peers is its roughly $500 million in available liquidity. This gives it major flexibility and the ability to bide its time while others are making major decisions in order to shore up their own operations.

Aphria may be the best positioned stock in the industry. Its high-quality management has kept the company in a strong position and much more resilient than its peers. Investors can take comfort knowing their capital will be in good hands.

Bottom line

It’s always crucial that investors take a conservative approach whenever estimating numbers ahead of making an investment. This is even more prevalent when investing in the cannabis space, as a lot of unknowns still exist.

When taking a conservative approach in estimating future growth numbers of the industry, it becomes extremely clear that a number of pot stocks are overvalued and not worth an investment.

Aphria and OrganiGram are among the only companies with fair valuations, and since these two have the best long-term prospects, they are the only cannabis stocks worth investing in today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends OrganiGram Holdings.

More on Cannabis Stocks

Pot stocks are a riskier investment
Cannabis Stocks

Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a…

Read more »

Caution, careful
Cannabis Stocks

I Wouldn’t Touch This TSX Stock With a 60-Foot Pole

I wouldn't touch Canopy Growth Corp (TSX:WEED) stock with a 60-foot pole.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Why This Little-Known Cannabis Stock Could Double in 2024

This cannabis stock has already doubled this year since 52-week lows and could easily rise that much once more.

Read more »

Bad apple with good apples
Cannabis Stocks

1 TSX Stock I Wouldn’t Touch With a 420-Foot Pole

Down 87% from all-time highs, Cronos Group stock is a still a high-risk investment for long-term shareholders in 2024.

Read more »

A cannabis plant grows.
Cannabis Stocks

Canopy Growth: Buy, Sell, or Hold?

Canopy Growth (TSX:WEED) stock should make a killing on U.S. expansion, but investors will need to be very patient.

Read more »

Marijuana plant and cannabis oil bottles isolated
Energy Stocks

3 Canadian Value Stocks to Buy Right Now

Undervalued Canadian stocks such as Secure Energy should be part of your shopping list in May 2024.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Here’s Why it’s Not Too Late to Buy Cronos Group Stock

The optimism about U.S. federal marijuana legalization and its anticipation are potent bullish triggers for the Canadian cannabis industry.

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Canopy Growth Stock Is on a Tear: Is it a Good Buy Now? 

Canopy Growth (TSX:WEED) stock surged by 80% from news out of the U.S., but is enough there without the news…

Read more »