Investors have flocked to Canadian marijuana stocks. But the U.S. cannabis market is much larger than that of its northern neighbor. The problem, of course, is that the sale of marijuana remains illegal at the federal level in the U.S., while Canada has officially legalized both medical and recreational marijuana nationwide.

The markets in both countries have presented opportunities for aspiring companies. MariMed (OTC:MRMD) is a good example of a U.S.-based company that has enjoyed great success, with its stock ranking as the best-performing marijuana stock in the first half of 2018. Canadian marijuana grower Organigram Holdings (NASDAQ:OGI) has also turned in a solid performance year to date. 

Which of these two marijuana stocks is the better choice for investors? Here's how MariMed and Organigram compare.  

Marijuana leaves on top of globe

Image source: Getty Images.

The case for MariMed

MariMed focuses primarily on three aspects of the marijuana market. The company develops and operates medical cannabis production facilities that it leases to customers. MariMed provides professional consulting services to help businesses obtain state licenses to operate in the cannabis market. It also distributes its own lineup of cannabis products.

The company has developed cannabis production facilities in five states: Delaware, Illinois, Nevada, Maryland, and Massachusetts. Arcview Market Research and BDS Analytics project that combined annual marijuana spending in these states will total nearly $2.8 billion by 2022. Massachusetts is one of seven states the firms think will claim cannabis markets exceeding $1 billion annually within the next four years. 

But MariMed isn't limiting its vision to just these states. The company's CFO, Jon Levine, recently stated that MariMed has "laid the groundwork for opportunities in Pennsylvania, New Jersey, Michigan, Florida, and Ohio." These five states represent an estimated combined marijuana market of around $4 billion annually by 2022. Like Massachusetts, both Florida and Michigan could each have markets of at least $1 billion.

The company's cannabis-related products currently include cannabis-infused popcorn, mints, and fruit chews sold under the Kalm Fusion and Betty's Eddies brands. MariMed also markets cannabis flower, concentrates, vape pens, and extracts under the Nature's Heritage brand plus vape pens under the Lucid Mood brand. 

MariMed recently reported second-quarter revenue of $2.9 million, an increase of 81% over the prior-year period. The company thinks it will continue to generate strong sales growth as it begins full operations in Massachusetts.

The case for Organigram

In Organigram's latest quarter, the company posted revenue of 3.7 million in Canadian dollars (in the ballpark of US$2.8 million), up 95% year over year. Unlike most Canadian marijuana growers, the company also reported a profit. Organigram's net income in Q3 totaled CA$2.8 million. 

This growth and profitability reflect Organigram's progress in the domestic medical cannabis market. Organigram's bigger opportunity, though, lies in the recreational marijuana market in Canada that's scheduled to open in October and is expected to generate around CA$5 billion annually. There are two keys to success in Canada's recreational marijuana market: production capacity and distribution channels. Organigram checks off both boxes pretty nicely.

The company currently can produce around 36,000 kilograms of cannabis per year. Organigram CEO Greg Engel told my colleague Sean Williams last month that the company is confident it can ramp up to annual production capacity of 113,000 kilograms by 2020. As for distribution, Organigram already has supply agreements in place with four Canadian provinces for the recreational marijuana market.  

What about extending its reach beyond Canada? The biggest opportunity right now is in Germany, which legalized medical cannabis last year. Organigram bought a minority stake in Alpha-Cannabis Germany with the intention of capturing a piece of market share in the largest European market. In addition, Organigram received a license in May to export medical cannabis to Australia. The company partnered with Melbourne-based CannaTrek, which is authorized to distribute medical cannabis in Australia. 

Perhaps the biggest reason Organigram could appeal to investors is its valuation. While the stock isn't cheap, Organigram claims one of the lowest forward earnings multiples in the Canadian cannabis industry.

Better marijuana stock

Both of these stocks have tremendous growth prospects. Both already have solid momentum. But only one of them is already profitable -- Organigram. Also, while Organigram reported cash and short-term investments of CA$156 million as of May 31, MariMed only had cash and cash equivalents of a little over US$5 million at the end of June.  

I think its profitability and cash position make Organigram the better pick between these two marijuana stocks. My view is that Organigram should continue to perform well over the next couple of years. Because I prefer to invest with a long-term perspective, though, I'm not recommending Organigram as a stock to buy.

My reasoning is that a supply glut is coming to the Canadian market within the next couple of years. Organigram's low-cost operations will help it perform better than other smaller marijuana growers when that happens. However, I think that companies that don't have extensive global operations and/or tight relationships with large organizations outside of the cannabis industry will be at a disadvantage. I doubt that Organigram will meet either criteria.

Organigram is the better marijuana stock than MariMed. I just don't think it's the best marijuana stock.