There are winners and losers in every industry. So far in 2018, one of the biggest winners in the Canadian marijuana industry has been Organigram Holdings (OGI 10.35%). The stock is up close to 20% year to date. Cronos Group (CRON 0.74%), on the other hand, has been a loser this year, with its share price dropping more than 20%.

Of course, a little over five months is a very short period to use for comparing stock performances. Which of these two marijuana stocks is a better pick over the long run for investors? Here's how Cronos and Organigram stack up against each other.

Marijuana buds and bottle of CBD oil on top of cutout of red Canadian maple leaf

Image source: Getty Images.

The case for Cronos Group

One factor behind Cronos Group's dismal stock performance so far this year was the company's somewhat disappointing first-quarter results. But while Cronos' bottom line worsened considerably from the prior-year period, it did so because the company's spending increased across the board. With big opportunities on the way, spending sooner rather than later to be ready probably shouldn't be viewed as a negative.

Cronos is already capitalizing on one key opportunity: the Canadian medical marijuana market. The company's Q1 revenue soared, with most of its money made by selling medical marijuana in Canada. Cronos has also increased the percentage of sales made from cannabis oils, which are more profitable than selling dried cannabis.

Another major opportunity that Cronos is currently targeting is the sale of medical marijuana in international markets. The biggest of these markets right now is in Germany. Cronos' exclusive supply agreement with Pohl-Boskamp, which distributes products to over 12,000 German pharmacies, gives the company a foothold in this large medical marijuana market. 

The most anticipated upcoming catalyst for Cronos Group is the legalization of recreational marijuana in Canada. The Canadian Senate is scheduled for a key vote on June 7, 2018. If the vote passes, it will set the stage for marijuana to be legalized throughout the country for recreational use by late summer.

Cronos has prepared for this legalization in a couple of key ways. First, the company has ramped up its production capacity. Cronos expanded its Peace Naturals facility, is building a greenhouse in Israel, and is building an indoor facility in Australia. The company estimates that its annual production capacity will top 47,000 kilograms by the beginning of next year.  

Second, Cronos has partnered with U.S.-based marijuana company MedMen. The two companies formed a joint venture to open retail stores for the sale of recreational marijuana in the Canadian market.

The case for Organigram Holdings

While Cronos posted a big net loss in its last quarter, Organigram delivered all-time high profits in its fiscal Q2. A key driver of the company's earnings was a major uptick in sales of more lucrative cannabis oils.

The opportunities for Cronos all apply to Organigram. Both companies are very close in total sales in the domestic medical marijuana market. But as is the case with Cronos, Organigram has its eyes on even larger markets.

Until recently, Organigram didn't have a clear strategy for expanding into international medical marijuana markets. However, in early May, the company announced plans to buy up to 25% of Alpha-Cannabis Germany, a deal that should enable Organigram to move into the German medical marijuana market.

Organigram also received a permit in May to begin shipping medical cannabis to international markets. The company is now set to supply medical marijuana in Australia through its relationship with Cannatrek Medical PTY Ltd, which has operations in Australia.

What about the recreational marijuana market in Canada? Organigram has been gearing up for it, too. The company's expansion efforts should allow it to produce over 65,000 kilograms of cannabis annually by April 2019. Annual production capacity could increase to 113,000 kilograms by April 2020 with the completion of additional expansion projects.

Organigram also recently unveiled its branding strategy for the Canadian recreational marijuana market. The company plans to launch three recreational marijuana brands assuming legalization efforts are successful: The Edison Cannabis Company, ANKR Organics, and Trailer Park Buds.

Better marijuana stock

Both Cronos Group and Organigram grow marijuana and sell it to essentially the same markets. What differentiates the two stocks? Valuation.

Cronos is perhaps the most overvalued Canadian marijuana stock on the market. The company's market cap currently stands at a little over $1 billion. Organigram's market cap is less than half as much -- but the marijuana grower should have greater production capacity than Cronos will by next year. As a result, Organigram ranks as one of the most attractively valued marijuana stocks.

Because of this significant valuation gap, I think that Organigram is the better marijuana stock right now. My view is that more consolidation will come at some point in the Canadian marijuana industry. When it does, Organigram will likely be among the top acquisition targets

Keep in mind, though, that if supply for marijuana outstrips demand, all marijuana stocks will suffer -- especially those of smaller companies like Organigram. There are tremendous risks with investing in Organigram. Of course, if the Canadian recreational marijuana market and global medical marijuana markets are even bigger than expected, there could be tremendous returns as well.