Marijuana stocks are blazing hot, and it's not hard to see why. According to ArcView, a leading cannabis research firm, the compound annual growth rate for legal North American weed sales is estimated to be 26% between 2016 and 2021. In terms of numerical value, we're talking about almost $15 billion in legal sales growth as a result of ongoing legalization efforts in Canada, Mexico, and the U.S., as well as organic growth opportunities in already legal nations and states.

We've also witnessed a very discernible shift toward favorability among the American public. CBS News' latest poll from April 2017 found that an all-time record number of respondents (61%) wants to see pot legal across the country. A separate study from Quinnipiac University, also this past April, found almost universal support (94%) for medical cannabis when asking if it should be legal in the United States. 

Cannabis buds in a jar lying atop a pile of cash.

Image source: Getty Images.

Opinions are shifting toward cannabis, sales are growing rapidly, and marijuana stock investors are profiting. Of the one dozen largest marijuana stocks by market cap, the average of these weed stocks has more than doubled in value over the trailing-12-month period. But do these rising valuations make sense? That will depend on whether these publicly traded pot stocks have the sales growth to back up their budding valuations.

Three pot stocks with the highest annual sales

Today, we're going to take a look at three pure-play marijuana stocks with the highest annual sales, based on their most recent full-year earnings report.

You'll note the use of "pure play," meaning we're excluding publicly traded marijuana companies that only derive a portion of their revenue from legal pot. This means Scotts Miracle-Gro, which generates near 10% of its annual sales from its focus on hydroponics (growth in a nutrient-rich water solution), soil, and lighting solutions, for the medical cannabis industry won't make the cut. Neither will Insys Therapeutics, which only recently launched its oral dronabinol solution Syndros as a treatment for chemotherapy-induced nausea and vomiting, as well as anorexia associated with AIDS. Insys relies predominantly on sales of breakthrough cancer therapy Subsys for the time being.

Instead, the following three pot stocks, which all share something in common, are your true "green giants."

A cannabis bud lying on top of a doctor's prescription pad.

Image source: Getty Images.

MedReleaf: $32.1 million 

In terms of annual sales, no marijuana stock generates more than Canadian medical cannabis grower and retailer MedReleaf (NASDAQOTH:MEDFF), which only went public about three months ago. As you'll note below, all three of the top-selling pot stocks are Canadian producers and retailers for the country's medical weed industry.

MedReleaf is in fine financial shape for a number of reasons. Rather than having to effect numerous bought-deal financings that could balloon its outstanding share count, its recent initial public offering raised bountiful capital that it can use to expand its Bradford facility in Ontario. This will lead to new capacity that can help MedReleaf meet rising demand from the medical side of the equation, as well as the growing possibility that Canada may legalize recreational marijuana by July 1, 2018.

In particular, MedReleaf has two advantages that have allowed it to thus far stand out from a crowded field. First, it tends to focus on higher-quality strains of cannabis, which also cost more. MedReleaf has discovered that medical pot patients will pay more for a higher-quality product, which is one reason why the company's sales more than doubled from fiscal 2016.

Second, MedReleaf has a keen focus on cannabis oils. According to a company investor presentation, it controlled 44.5% of the Canadian cannabis oils market as of the fourth quarter of 2016. Cannabis oils traditionally have a higher price point and margins than dried cannabis, which has set MedReleaf up for success.

An indoor commercial cannabis grow farm.

Image source: Getty Images.

Canopy Growth Corp.: $32 million

By a seemingly razor-thin margin, Canopy Growth Corp. (NYSE:CGC) has the second-highest annual sales total at $32 million.  However, it saw considerably quicker growth than MedReleaf in its most recent fiscal year as a result of its aggressive acquisition strategy. According to its full-year report, the company's sales grew by 214% from the previous year.

Canopy Growth is attempting to become the kingpin of the Canadian market by gobbling up other companies and land. Earlier this year, it completed its acquisition of Mettrum Health, which wound up giving Canopy Growth access to about half of Canada's registered medical patients. That's a sizable patient pool considering that Health Canada in May noted a 10% monthly growth rate in registered medical weed patients. It also acquired 472,000 square feet of land surrounding its headquarters, which could serve to expand its grow capacity if Canada were to legalize recreational weed. 

Another interesting tidbit about Canopy Growth that's helped its sales soar is the fact that it's one of just a handful of producers that's been cleared to export its cannabis to countries where medical marijuana is legal. A good example is Germany. Medical cannabis recently became legal in Germany, but domestic production is minimal, which is where Canopy Growth's exports come into play.

Finally, Canopy Growth relies on branding partnerships to attract new customers. Its Tweed branding is among the most recognized in Canada, and partnerships with well-known rap artist Snoop Dogg have only aided its efforts to improve brand awareness. 

Cannabis jars stacked atop each other.

Image source: Getty Images.

Aphria: $16.4 million

In a distant third, but growing very rapidly, is Canada's Aphria (NASDAQOTH:APHQF), which produced $16.4 million in full-year sales for fiscal 2017. Every headline figure moved in the right direction for Aphria in its latest full-year report, including 142% sales growth, 962% EBITDA (earnings before interest, taxes, depreciation, and amortization) growth from the previous year, a 44% decline in cash costs to produce dried cannabis, and a 670-basis-point increase in adjusted gross margin. 

Like MedReleaf, Aphria is trying to grow its operations primarily through organic expansion. It's in the process of working on a multiphase expansion that'll boost its growing capacity to 1 million square feet. In fact, it recently upped its projected annual output to 100,000 kilograms once its $100 million phase 4 project is complete. As with the other producers above, this project couldn't come at a better time considering the rapid growth in registered medical patients and the possibility of legal recreational pot coming to Canada by next summer.

Aphria is also among that aforementioned group of companies that have been given the OK to export cannabis to foreign countries. Between demand from Europe, Canada's medical pot industry, and the possibility of a recreational legalization, Aphria and its peers may struggle to meet demand, which would have been an almost laughable scenario just a few years before.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.