The marijuana business, as an investment opportunity, has come a long way in a short period of time. Not long ago, the only way to invest in pure marijuana plays like producers, distributors, or medically oriented companies was to buy stocks trading on the largely unregulated and thinly traded over-the-counter market.

Starting this year, however, investors have been able to buy shares of three top cannabis companies -- Canopy Growth Corp. (NYSE:CGC), Cronos Group (NASDAQ:CRON), and Tilray Inc. (NASDAQ:TLRY) -- on major U.S. exchanges. And given that the global market for legal medical and recreational marijuana is projected to grow by an astounding 34.6% per year for the next six years, according to a report by Grand View Research, these recent up-listings could produce big profits for early investors. Could these three marijuana plays make you rich? Let's dig deeper to find out. 

Two marijuana leaves laid on top of a one-hundred dollar bill.

Image Source: Getty Images.

The marijuana king

Canada's Canopy Growth is the largest pot company by market capitalization listed on the U.S. stock market, and for good reason. Based on its current and planned greenhouse space, it is on track to have one of the largest production capacities among Canadian cultivators. It has also broadened its brand significantly by partnering with the likes of marijuana icon Snoop Dogg to develop premium products. And beverage distributor Constellation Brands (NYSE:STZ), which had already purchased a sizable 9.9% stake in Canopy, this month doled out another $3.88 billion to raise its stake to 38%. 

This partnership with Constellation is key because it should provide Canopy Growth the financial capacity to build out its production facilities even further, giving it an important edge over its competitors. In an industry on the verge of breaking out thanks to the legalization of marijuana in many U.S. states and a handful of countries, production capacity might turn out to be the most important factor in determining market share -- at least initially. So, investors probably weren't wrong when they bid up Canopy's shares by an astonishing 338% in the last 12 months. 

The downside, though, is that Canopy is now transitioning into "prove it" mode. With the company's stock trading at an eye-popping price-to-sales ratio of 117.6, its top line needs to take flight soon. Otherwise, its premium valuation might vanish. 

A pioneer in the industry

Cronos Group is a marijuana investment firm with a global footprint. While its main operations take place in Canada, it also has production and distribution platforms in Germany, Poland, Israel, and Australia. However, this company, like most of its closest competitors, is banking on the legal recreational pot market opening in Canada this October to drive sales in the near term.

To prepare for this game-changing event, Cronos has been increasing growing capacity, as well as rolling out a new high-end brand known as Cove. Cove's claim to fame, if you will, is that it emanates from the Okanagan Valley in British Columbia -- an area known for producing some of the best cannabis in the world. That's an exceedingly smart move, as brand awareness will likely turn out to be a key factor in determining the winners and losers in this emerging space over the longer term.  

All that being said, Cronos' stock is anything but undervalued. At a price-to-sales ratio of 230, Cronos is, in fact, one of the most expensive pot stocks out there. Of course, the shares could still turn out to be a bargain if the Canadian marijuana market goes gangbusters as some predict. But there are numerous reasons to take a skeptical view of some of the stately valuations being given to marijuana stocks right now. 

Wall Street loves this marijuana stock

Tilray, a self-proclaimed pioneer in the research, cultivation, production and distribution of medical cannabis and cannabinoids, made history earlier this year by becoming the first cannabis company to list directly on a major U.S. exchange. The truly exciting part, though, is that Tilray reportedly attracted a number of blue-chip investors during its IPO. It was yet another sign that the legal marijuana industry is nearing a tipping point in terms of legitimacy. 

Like Canopy and Cronos, Tilray's value proposition largely centers around the upcoming legalization of recreational marijuana in Canada. Industry insiders believe that the legal Canadian cannabis market will eventually generate several billion dollars in annual sales, which would obviously be a major boon for cultivators like Tilray. The company is expanding its global growth capacity in an effort to meet the looming demand. 

There are two clear risk factors facing this company right now, however. First off, there are over 100 licensed companies jockeying for position in the Canadian pot market, plus untold numbers of unlicensed dealers. Without a clear-cut economic moat to defend it against this crowd of competitors, Tilray's sales may get off to a slower-than-expected start when the Canadian market opens up in earnest.  

Secondly, Tilray's shares currently sport an enormous premium. While the numbers are still sketchy due to the recency of the company's IPO, some analysts have this stock presently trading at a price-to-sales ratio of 99. The market is clearly expecting Tilray's top line to grow by leaps and bounds soon in order to justify that kind of valuation. If it doesn't, however, the company's stock could be in for a noteworthy retracement. 

Investing takeaway

Canopy, Cronos, and Tilray all sport premium valuations that could be called into question if Canada's legal pot market fails to get off to a red-hot start. That's not to say that these stocks are destined to pull back, but the marijuana stock boom could turn out to be an over-inflated bubble set to pop. After all, none of these companies are trading on their current fundamentals, nor even on their near-term growth prospects. 

The bottom line here is that Canopy, Cronos, and Tilray are all trading on the hope and belief that the Canadian recreational pot market will be a  gold mine. That may happen, but there's no way to know if the sky-high sales estimates that all this optimism rests on will ultimately pan out. As such, investors who haven't already put these high-flying marijuana stocks into their portfolios may want to stay on the sidelines until more information is available.