Numerous investors looking to ride the green wave with marijuana stocks have honed in on Canada as the means of doing so. A handful of Canada’s major cannabis growers are publicly traded with market caps soaring by the billions. Other growers have smaller market caps and, yet, they have also experienced massive stock appreciation.
Two Canadian marijuana producers of growing interest fit into the latter group: Emerald Health Therapeutics (NASDAQOTH:EMHTF) and Organigram Holdings (NASDAQOTH:OGRMF). Emerald Health’s market cap may be small, comparatively speaking, but, it has shot up nearly 650% in the past year period, settling in the meantime above $500 million. During the same year period, Organigram’s market cap exceeded double its value, now more than $400 million.
The question facing those looking for marijuana stocks to invest in today is, “Which of the two weed stocks in Canada is the better choice?”
The case for investing in Emerald Health Therapeutics marijuana stocks:
Investors can place Canada’s impending legalization of recreational cannabis at the top of the top of the list of reasons to invest in Emerald Health Therapeutics (NASDAQOTH: EMHTF). While the original roll-out of legalization was intended for July, recreational marijuana should be available for legal purchase come September.
In the same manner as other Canadian growers racing the timeline to meet the high demand anticipated, Emerald Health busily devoted time and resources to capacity expansion. Currently underway is a 500,000 square-foot production facility. Last year, Emerald Health entered into a 50/50 joint venture with large grower Village Farms who, up to this point, had been solely in the business of growing greenhouse tomatoes, cucumbers, and bell peppers. As a result of Emerald Health’s stake in the joint venture, the company’s total production capacity was raised to 71,000 kg per year by 2020.
As much as the legal recreational marijuana market seems poised on the verge of explosive growth, this isn’t the only market upon which Emerald Health is focused. Emerald Health is also invested in the research and development of medical forms of cannabis; specifically, how THCA (a nonpsychotropic cannabinoid) might be used to treat neuroinflammatory and neurodegenerative diseases in addition to metabolic diseases and others unspecified. The company’s study of THCA, in collaboration with the University of British Columbia, has shown potential in animals and will likely extend to its first human clinical study later this year.
Blockchain technology is also on Emerald Health’s radar. At the start of 2018, the company and DMG Blockchain Solutions came together for a joint venture to “develop a blockchain-based supply chain management system and e-commerce marketplace for the legal cannabis industry.”
The case for investing in Organigram Holdings marijuana stocks:
Organigram Holdings (NASDAQOTH:OGRMF) is similarly vested in preparing for Canada to give the green light for legal recreational marijuana sales. While the company waits, however, it has had another booming business to attend to: medical marijuana. In the twelve months between January 2017 and January 2018, Organigram increased its total number of active patients per month by 495%.
The company’s current projection of annual production capacity is 22,000 kg. Organigram is in the process of expanding their capacity by 14,000 kg (36,000 kg total) by May of this year. Their plans of further future expansion amount to a predicted 113,000 kg in annual production by April 2020.
Aside from dried cannabis production, Organigram expanded its product portfolio to include cannabis oils and extracts. These higher-margin, higher-priced products are likely to boost the company’s margins in the coming years, particularly if dried cannabis sales fall.
Strategically, Organigram is focused on expanding its international footprint. With the launch of a new international division, led by a newly-hired president (who has valuable experience in the global marijuana market), the company’s target market will extend beyond Canada. Given the very real possibility of a cannabis supply glut in Canada, this broader target market will likely serve Organigram well.
Organigram offers some cost advantages; for one, the company’s New Brunswick locale translates to lower utility costs, wages, and corporate tax rates. This implies operating costs falling well below many of Organigram’s peers. Not only are operating costs at an advantage for Organigram, but, it has recently been named the sole “marijuana value stock.” An analysis last month by Sean Williams of The Motley Fool reported an incredibly low price-to-earnings-to-growth (PEG) ratio for Organigram, at 0.52.
While both marijuana stocks companies are likely to benefit from growth in both Canada’s recreational and medical marijuana markets, Organigram seems to have the edge in this competition.
With either company poised to benefit from cannabis market growth in Canada’s medical and recreational industries, the decision comes down to which of the two marijuana stocks offers the most value for the price of investment. Here, Organigram appears to have the advantage.
Yes, Emerald Health’s market cap is higher, but, its projected capacity by 2020 is lower than Organigram. Factor in Organigram’s plans for international expansion and the choice makes even more sense.
Investors need to keep one important factor in mind: choosing either of these marijuana stocks comes with considerable risk.
Both Organigram and Emerald Health are still smaller players in competition with heavy-hitters that have more cash on hand to fund their retail operations. Not to mention, a lot is riding on the predictions of Canada’s recreational market demand; if demand is not as high as Canada predicts, both marijuana stocks will suffer. If the potential supply glut does come into play, both of these marijuana growers are likely to see their weed stocks plunge.
The bottom line, as with any stock, is neither one comes with a guarantee of success (even with Organigram’s edge). However, Organigram has shown enticing potential by consistently outperforming expectations, upping its production game, demonstrating international strategy, and diversifying its product portfolio.
(For more information on marijuana stocks with Organigram Holdings, read Green Deals: This Marijuana Stock Might Be the Best Value Out There)