Medical and recreational cannabis use has been legalized in a growing number of U.S. states and on a national level in Canada, fueling a burgeoning legal cannabis industry in recent years. Cannabis stocks are now a prime focus for investors seeking potentially explosive sales and stock growth. But there are certain considerations associated with marijuana stocks that investors should keep in mind.
To begin with, cannabis stocks face higher-than-normal risk and volatility due to a long list of factors. Many publicly traded cannabis companies are young, unproven enterprises that face a complicated, fast-changing market that includes different laws across many local, state, and regional jurisdictions. Also, cannabis use is still illegal at the U.S. federal level. On April 1, 2022, the U.S. House of Representatives voted to decriminalize cannabis. The approval is regarded by many as a key step toward consensus on the issue over the long term, even though the proposal is not expected to pass in the Senate.
The challenges are particularly great for investors when it comes to marijuana penny stocks. Investors should be especially cautious and perform more than their usual due diligence when investing in these companies, which include up-and-coming names such as Cansortium Inc. and Goodness Growth Holdings.
Marijuana stocks, represented by the ETFMG Alternative Harvest ETF (MJ), an exchange-traded fund, have dramatically underperformed the broader market. MJ has provided a total return of -54.1% over the past 12 months, well behind the Russell 1000’s total return of 13.3%. MJ targets a broad assortment of cannabis industry stocks, including penny stocks.
Here are the top three marijuana penny stocks with the best value, the fastest growth, and the best performance. The market performance numbers above and all statistics in the tables below are as of March 31, 2022.
These are the marijuana penny stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in 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.
|Best Value Marijuana Penny Stocks|
|Price ($)||Market Capitalization (Market Cap) ($M)||12-Month Trailing P/S Ratio|
|HEXO Corp. (HEXO)||0.62||263.8||1.1|
|Aurora Cannabis Inc. (ACB)||4.00||859.1||4.3|
|OrganiGram Holdings Inc. (OGI)||1.66||516.0||6.6|
- HEXO Corp.: HEXO is a Canada-based consumer packaged goods cannabis company serving both the adult-use and medical cannabis markets. It also trades in Canada under the ticker HEXO.TO. On March 18, HEXO reported results for Q2 FY 2022, ended Jan. 31. Total net loss widened dramatically as total revenue grew by 60.4% year-over-year (YOY). Financial results were impacted by the fact that the company reported a write-down of $616 million related to impairments during the quarter.
- Aurora Cannabis Inc.: Aurora Cannabis is a Canada-based major cannabis producer and a licensed distributor. The company has operations in both the medical and consumer cannabis areas and has a division focused on cannabidiol products (CBD) for distribution in the U.S. It also trades in Canada under the ticker ACB.TO.
- OrganiGram Holdings Inc.: OrganiGram Holdings is a Canada-based licensed producer of cannabis-related, extract-based products for both medical and recreational use. The company distributes its products to consumers and through wholesale shipping channels. It also trades in Canada under the ticker OGI.TO. On March 25, the company announced the launch of two new strains of premium dried flower: Edison Kush Cakes and Edison Frozen Lemons. It also announced new products in its SHRED and Big Bag ‘O Buds product lines.
These are the marijuana penny stocks with the highest YOY sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue through organic or new ways, as well as find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
|Fastest-Growing Marijuana Penny Stocks|
|Price ($)||Market Cap ($M)||Revenue Growth (%)|
|OrganiGram Holdings Inc. (OGI)||1.66||516.0||64.8|
|HEXO Corp. (HEXO)||0.62||263.8||63.0|
|Cronos Group Inc. (CRON)||3.89||1,459||51.3|
- OrganiGram Holdings Inc.: See company description above.
- HEXO Corp.: See company description above.
- Cronos Group Inc.: Cronos Group Inc. is a vertically integrated cannabis company with distribution across five continents. It distributes medical marijuana and cultivates cannabis oil. Cronos Group’s portfolio includes a global wellness platform, adult-use brands, and three hemp-derived CBD brands. Cronos announced on March 21 that founder Mike Gorenstein would return to the company's management as chairman, president, and chief executive officer (CEO), effective immediately. Gorenstein previously served in these positions for the company until Sept. 2020. He succeeds Kurt Schmidt, who led the company through the disruptions of the COVID-19 pandemic.
These are the marijuana penny stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.
|Marijuana Penny Stocks with the Best Performance|
|Price ($)||Market Cap ($M)||12-Month Trailing Total Return (%)|
|Sundial Growers Inc. (SNDL)||0.70||1,442||-38.1|
|OrganiGram Holdings Inc. (OGI)||1.66||516.0||-52.2|
|Aurora Cannabis Inc. (ACB)||4.00||859.1||-57.0|
|ETFMG Alternative Harvest ETF (MJ)||N/A||N/A||-54.1|
- 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. On March 31, Sundial Growers announced that it had completed the acquisition of Alcanna Inc. for total consideration of approximately $320 million of cash and common shares. Alcanna was on of the largest private-sector retailers of alcohol in North America and the largest in Canada by number of stores. It also was the majority owner of Nova Cannabis Inc., a Canada-based cannabis retail chain.
- OrganiGram Holdings Inc.: See company description above.
- Aurora Cannabis Inc.: See company description above.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
New York Times. "House Votes to Decriminalize Cannabis."
YCharts. “Financial Data.”
OrganiGram Holdings Inc. "Organigram Provides Corporate Update and Announces New Product Launches."
Cronos Group Inc. "Cronos Group Founder Mike Gorenstein Returns as CEO."
Sundial Growers Inc. "Sundial Growers Completes Acquisition of Alcanna."