Canadian marijuana stocks appear to be really hitting their stride right now. Shares of HEXO Corp. (NASDAQOTH:HYYDF), formerly known as Hydropothecary, are up 65% so far in 2018. Organigram Holdings Inc. (NASDAQOTH:OGRMF) stock isn't too far behind, with a year-to-date gain of nearly 60%.

But which of these marijuana stocks is the better choice for investors now? Here's what you need to know about how HEXO and Organigram stack up against each other. 

Marijuana buds on top of tiny Canadian flags.

Image source: Getty Images.

The case for HEXO

Although HEXO is already a key player in Quebec's medical cannabis market, the real growth opportunity for the company is just around the corner. Canada is scheduled to open its recreational marijuana market in October. And HEXO appears to be ready to try to claim a nice chunk of that market. 

HEXO currently claims annual production capacity of 25,000 kilograms. That figure should soon more than quadruple. Construction is underway for a major expansion to its facilities that will boost HEXO's capacity to 108,000 kilograms per year. The company expects to complete its building project in December 2018. 

There shouldn't be any worries about where all the cannabis from that added capacity will go. HEXO landed a huge supply agreement with its home province of Quebec in April. Under this deal, the company will supply 25,000 kilograms of recreational cannabis to Quebec in year one, representing a 35% share of the province's retail cannabis market. The volumes to be supplied increase in years two and three, with supply volumes the last two years of the agreement to be negotiated later. 

The company plans to open its "Fire & Flower" retail stores in six provinces. Fourteen stores will open this year in Quebec with another 36 stores planned for 2019. HEXO has obtained licenses for two retail stores in Manitoba. It expects to receive the green light to launch retail stores in Alberta, British Columbia, and Ontario -- although Ontario will only allow online sales in 2018. 

HEXO also is the only Canadian marijuana grower other than Canopy Growth to have already lined up a partnership with a major alcoholic beverage company. Last month, Molson Coors Brewing selected HEXO to form a joint venture focusing on developing cannabis-infused beverages.  

Probably the biggest knock against HEXO is that it currently doesn't have an international presence. However, HEXO plans to expand into Latin America and Europe in 2019. The company also anticipates jumping into the U.S. if federal anti-marijuana laws are changed.

The case for Organigram

Organigram is a little ahead of HEXO in terms of annual production capacity. The company's current facilities can grow 36,000 kilograms per year. By April 2019, though, Organigram expects that level to increase to 62,000 kilograms. And by October of next year, the company thinks its annual production capacity will be 113,000 kilograms. 

Although Organigram can't claim as hefty of a deal as HEXO has with Quebec, it has secured supply agreements for the recreational cannabis markets in Alberta, Manitoba, New Brunswick, Nova Scotia, Ontario, and Prince Edward Island. The company also thinks it has a good shot at landing a supply agreement with Newfoundland.  

What about the prospects for partnering with a big beverage company? I view Organigram as a dark-horse candidate for Diageo, the maker of brands including Crown Royal whiskey and Guinness beer. Diageo is reportedly in talks with several Canadian marijuana growers about collaborating on developing cannabis-infused beverages.

One area where Organigram appears to have a clear head start over HEXO is in international medical cannabis markets. Organigram inked a deal with Alpha-Cannabis Germany, which gives it a beachhead in the largest international marijuana market outside of North America. The company also partnered with Cannatrek to establish a presence in Australia. 

Last, but certainly not least, Organigram ranks as one of the more attractively valued marijuana stocks. Granted, the stock isn't cheap based on its historical performance. However, my Motley Fool colleague Sean Williams earlier this year dubbed Organigram as a "marijuana value stock" compared with its rivals.

Better marijuana stock

It's not an easy decision between these two marijuana stocks. HEXO's deal with Molson Coors is definitely a feather in its cap. So is the massive Quebec supply agreement. However, I think the nod goes to Organigram.

In my view, Organigram's relatively lower valuation and its lead in establishing international operations give it a leg up over HEXO. I also think that the company's higher production capacity will allow it to generate greater revenue starting later this year.

Having said that, though, I'm not sold yet on Organigram as a stock for long-term investors to buy. My concern is that the larger players like Canopy Growth could squeeze out some of the smaller companies when supply catches up with demand in the Canadian market. I could be overly pessimistic, but for now my view is that Organigram is the better marijuana stock when compared against HEXO -- but not the best place for investors to park their money.  

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of Molson Coors Brewing. The Motley Fool recommends Diageo. The Motley Fool has a disclosure policy.