Marijuana is going mainstream. With conservative-minded Oklahoma voting to become the 30th state to legalize cannabis for medical use and Canada green-lighting pot for recreational purposes among adults earlier this year, the legalization movement is picking up steam -- so much so that even former Republican Speaker of the House John Boehner agreed to join marijuana grower and dispenser Acreage Holdings as its spokesman last April. 

This monumental shift in public opinion has transformed cannabis into one of the fastest-growing industries on the planet. Medical and recreational pot sales in Canada, for instance, are projected to grow from $1.3 billion in 2018 to $5.4 billion by 2022, according to San Francisco-based ArcView Group. The same research firm also has global marijuana sales rising at a compound annual growth rate of 24.9% over the next eight years, culminating in a staggering $146 billion market by the end of 2025. 

A marijuana plant flowering underneath a grow light.

Image source: Getty Images.

As a direct result of these jaw-dropping growth projections, major beverage makers such as Constellation Brands (NYSE:STZ) and Molson Coors Brewing (NYSE:TAP) have already jumped into the fray by forming partnerships with Canadian marijuana producers Canopy Growth Corporation (NASDAQ:CGC) and The Hydropothecary Corporation (NYSE:HEXO), respectively. Other major beverage makers such as Anheuser-Busch InBev, Pernod Ricard SA, Heineken Holding NV, Coca-Cola Co., and Diageo PLC are also exploring the possibility of partnering with a Canadian grower to get in on the action, according to a report by The Globe and Mail.

These hurricane-force tailwinds have thus sent the share prices of the first trio of companies to list on major U.S. exchanges -- Canopy Growth Corp., Cronos Group (NASDAQ:CRON), and Tilray Inc. (NASDAQ:TLRY) -- blasting higher this year. In the past 30 days alone, for instance, Canopy's stock has gained 87%, Cronos' shares have marched higher by 107%, and Tilray's valuation has risen by an eye-popping 214%.   

Can these top Canadian pot stocks continue to defy gravity, or should investors start to lock in some gains? Let's take a look to find out. 

Value drivers and competitive roadblocks 

Canadian pot stocks have two clear-cut value drivers: production capacity and attractiveness as a partner for a major beverage maker. Brand awareness, after all, shouldn't come into play until the market matures, and forward-looking sales contracts are largely a derivative of production capacity based on the data coming out thus far.

With this theme in mind, let's first look at where Canopy, Cronos, and Tilray all stack up in terms of their projected production capacity by the end of 2018, relative to other top Canadian marijuana producers.

Company Production Capacity Rank Market Capitalization 
Canopy Growth Corp. 1 $11.5 billion
Aurora Cannabis 2 $5.88 billion
Aphria 3 $4.73 billion
Hydropothecary Corp. 4 $1.08 billion
Tilray 5 $7.25 billion
CannTrust 6 $833 million
Cronos  7 $2.13 billion
Organigram Holdings 8 $653 million

 Data source: The Hydropothecary Corporation. Current as of Aug. 27, 2018. 

The first clear takeaway here is that Canopy's top-dog status in terms of production capacity goes hand in hand with its industry-leading market capitalization. However, both Cronos and Tilray lag well behind their fellow Canadian pot producers -- despite their stately market caps. 

Turning to the question of attractiveness as a partner, Canopy Group has already inked a nearly $4 billion deal with Constellation Brands. This landmark partnership -- combined with its leading production capacity -- arguably goes a long way toward justifying the company's rather handsome valuation. Cronos and Tilray, however, don't stand out as particularly attractive partners based on their current production capacities.

While Cronos and Tilray have been working to broaden their footprint well beyond Canada, these two companies don't have the production capacity quite yet to capture a significant chunk of the Canadian legal pot -- at least not right off the bat. That makes companies like Aurora Cannabis, Aphria, and Hydropothecary Corp. arguably more attractive from a deal-making perspective right now. In fact, Hydropothecary has already joined forces with Molson Coors Brewing to develop cannabis-infused drinks. 

What's next?

With the backing of Constellation, Canopy now has the financial capacity to expand its industry-leading production capacity even further. Canopy, therefore, has a real shot at developing a nearly insurmountable competitive moat. And to shore up its competitive position once and for all, the company may even go on an acquisition spree soon. 

Cronos and Tilray, on the other hand, may struggle to push higher in the near term. Both companies need to strike a high-dollar partnering deal to justify their enormous market caps. Their monstrous valuations, after all, have clearly become untethered from their underlying fundamentals, as well as their current competitive positions within the broader Canadian pot market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.