If past performance was the best way to pick stocks, Aphria Inc. (NASDAQOTH:APHQF) would be the hands-down winner over MedMen Enterprises (NASDAQOTH:MMNFF). In less than three years of its stock trading publicly, Aphria's share price has multiplied by nearly 20 times. MedMen isn't up nearly that much in its first year of trading.

Of course, past performance isn't the best way to pick stocks. It's much more important to evaluate companies' business prospects. Which is the better marijuana stock between Aphria and MedMen? Here's how their prospects stack up against each other.

Pile of marijuana leaves

Image source: Getty Images.

The case for Aphria

There's no question that Aphria is on the cusp of phenomenal growth. Canada's recreational marijuana market opens in just a few weeks. Many expect exceptionally strong demand, which means that cannabis producers with solid production capacity and distribution channels should make a lot of money.

Aphria definitely appears to check off both boxes. The company can already produce 35,000 kilograms per year. In 2019, though, Aphria anticipates that its annual production capacity will increase to 255,000 kilograms. Aphria has supply agreements for the adult-use recreational marijuana market in place with all 10 Canadian provinces plus the Yukon territory. It also selected large wine and spirits distributor Southern Glazer's as its exclusive distribution partner in Canada. 

One question mark for Aphria relates to the potential for partnering with a major beverage company to develop cannabis-infused drinks. Constellation Brands has partnered with Canopy Growth, while Molson Coors teamed up with HEXO. Guinness beer maker Diageo is also reportedly seeking a cannabis partner, with Aphria potentially one of the top candidates under consideration.

Aphria should have an even greater long-term opportunity for growth in international medical marijuana markets. The company is well positioned in Germany, the largest marijuana market outside of the U.S. and Canada. It also has operations in several other international markets, including Australia, Latin America, Lesotho, and Malta.

The company claims one of the best financial track records in the Canadian cannabis industry. Aphria has put together a string of 11 consecutive quarters of positive adjusted EBITDA. It also has a solid balance sheet with close to 350 million in Canadian dollars in cash, cash equivalents, and marketable securities thanks to a bought-deal financing that closed in June.  

The case for MedMen

MedMen also hopes to profit from the Canadian recreational marijuana market. The company teamed up with Cronos Group to form a joint venture, MedMen Canada, that plans to launch retail cannabis stores throughout Canada. 

But while MedMen is targeting the Canadian market and lists its stock on a Canadian stock exchange, it's actually a U.S. company. MedMen is headquartered in California, which has the largest marijuana market in the U.S. and in the world. 

The company operates eight retail cannabis stores in its home state, with the most recent one opening in June. These stores are highly successful, as evidenced by MedMen's latest quarterly update that its California stores achieved revenue per square foot of $6,541. That performance makes MedMen one of the top retailers in the world on that key metric.

MedMen also currently has operations in two other states. The company runs two dispensaries in Nevada and is opening a new store in the Las Vegas area as well as relocating one of its existing stores. In addition, MedMen has four medical marijuana dispensaries in New York state.

Florida is the company's newest market. MedMen recently closed on its acquisition of Treadwell Nursery. This deal gives the company one of 14 cultivation licenses in Florida and allows MedMen to open up to 30 dispensaries. Although Florida only allows the legal use of medical marijuana, it's projected to become the third-largest marijuana market in the U.S. by 2022.

Better marijuana stock

Making a decision as to which is the better marijuana stock between Aphria and MedMen comes down to which company has the greater growth prospects. 

My view is that Aphria probably has the better opportunities for growth over the next year. The opening of the Canadian recreational marijuana market should give Aphria a quick and dramatic boost in revenue. However, MedMen appears to have the more significant growth opportunity over the longer run, simply because it does business in the U.S. and Aphria doesn't. I think this gives MedMen the nod as the better marijuana stock for now.

It's important to note, though, that the dynamics could change if the U.S. relaxes its federal marijuana laws in a way that allows Aphria to enter the U.S. market. The company has a close relationship with Liberty Health Sciences, which could give Aphria a quick vehicle to move into the U.S. if the regulatory environment changes.

Investors should also know that both Aphria and MedMen face considerable risks. Supply is expected to outstrip demand in Canada within a few years, which could lead to problems for Aphria if it can't offload surplus capacity to international markets. Marijuana remains illegal at the federal level in the U.S., which means that there could be a crackdown that negatively impacts MedMen in the future. For both of these stocks, the risks are great -- but so are the potential rewards.

Editor's note: A previous version of this article stated that MedMen's market cap was close to $3.2 billion. This figure was derived from a publicly-available data source but was incorrect. The company's market cap is actually closer to $2.4 billion. The Fool regrets the error.

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.