The big day has finally arrived. Today is the day that recreational marijuana is legalized for sale across Canada, making it the first industrialized nation in the world, and only second overall behind Uruguay, to give adult-use cannabis the green light.

Although this is a long-awaited day for the legal weed industry, it's perhaps an even bigger day for investors in marijuana stocks. You see, since the beginning of 2016 we've witnessed a number of pot stocks rise by more than 1,000%, and now the time has come for those companies to put up or shut up, so to speak. In other words, the time for promises is over, and investors are eagerly awaiting tangible sales and profit results.

One such marijuana stock that I've been highly skeptical of in recent quarters is Aurora Cannabis (NASDAQ:ACB). Despite being the third-largest pot stock by market cap -- and expected to lead its peers in aggregate annual production -- Aurora has a lot to prove if it's to maintain or build on its lofty valuation. But if Aurora Cannabis can master these five keys to success, it could prove me wrong.

A person holding a cannabis leaf in the middle of a large grow farm.

Image source: Getty Images.

1. Capacity expansion on track and on budget

Aurora Cannabis has gained itself quite the bullish flock of investors, and they're all laser-focused on the company's peak production potential of 570,000 kilograms, according to the company. Mind you, this peak estimate doesn't include the ongoing acquisition of ICC Labs for just over $220 million, which should easily push Aurora above 600,000 kilograms annually when at full capacity.

But investors have to understand that Aurora is still a long way from hitting this peak production capacity. Its most recent quarterly report suggests that it was operating at a run rate of around 45,000 kilograms a year as of September, with a forecast of hitting 100,000 kilograms of annual run rate by the end of the calendar year. When its fiscal year is complete at the end of June 2019, it'll still only be producing an estimated 150,000 kilograms annually.

Between now and, say, the end of 2020, Wall Street and investors will be looking for Aurora to stay on track and on budget with its core facilities. This includes the overseas retrofit of greenhouses in its joint venture with Alfred Pedersen & Son (Aurora Nordic); its organic build spanning 1.2 million square feet in Medicine Hat, Alberta, known as Aurora Sun; and the ongoing expansion of around 1.1 million square feet owned by ICC Labs.

Cannabis leaves being held in front of a globe of the Earth.

Image source: Getty Images.

2. A growing international presence

One of the more overlooked aspects of Canada's legalization is that the domestic market isn't worth nearly as much as international markets over the long run. A report from Health Canada pegged annual domestic demand at roughly 1 million kilograms, with a handful of provincial reports looking for closer to 800,000 kilograms. However, peak production for all growers should easily exceed 3 million kilograms. This excess will be targeted at foreign countries where medical marijuana is legal.

As of the end of its fiscal 2018, Aurora Cannabis had operations in 18 countries and five continents. But, once again, we're talking about relatively nascent operations with the green flag officially waving in Canada as of today (Oct. 17). What skeptics like myself are going to want to see is Aurora specifically focusing its attention on these foreign markets that'll likely make up well over half of its annual sales. 

The company's Aurora Nordic project will play a key role in facilitating this foreign presence by supplying an estimated 120,000 kilograms, or more, of medical cannabis to the Scandinavian region of Europe. Look for Aurora to really focus on its international expansion strategy over the next couple of quarters.

Four vials of cannabidiol oil lined up on a counter.

Image source: Getty Images.

3. A focus on product differentiation

Not to necessarily rank these keys to success, but if there's a top or second-most important priority for the company, it's going to be differentiating its products from the rest of its peers. That's because there's more to success in this industry than simply growing as much marijuana as possible.

Aurora may be the kingpin of growth potential, but it has some serious catching up to do compared with, say, Canopy Growth Corp., which has what's arguably the most recognized weed brand in the country in its portfolio (Tweed). Canopy's sales channels and branding make it a formidable foe in the cannabis space.

The way Aurora can differentiate itself is twofold. First, it'll need to devote some time, effort, and capital to building up its brands. And secondly, it'll need to broaden its product line well beyond dried flower, which has shown itself prone to commoditization over time in select U.S. states where adult-use weed is legal. Aurora's push into cannabis oils and other alternative products, such as infused beverages, will be crucial to lifting its margins and making every dollar in revenue really count.

One quick note: With the exception of oils, alternatives products including infused beverages, vapes, concentrates, and edibles, aren't legal yet. Parliament is expected to discuss and broaden the options for consumption in 2019.

Two businessmen in suits shaking hands, as if in agreement.

Image source: Getty Images.

4. A brand-name partnership

Next, Aurora Cannabis is very likely going to want to land a partnership or investment with a brand-name company to validate its position as a top-tier pot company. After all, with potentially 600,000-plus kilograms of annual production at its disposal, it's only logical that a brand-name beverage, tobacco, or pharmaceutical company would look to partner with Aurora.

Last month, Coca-Cola (NYSE:KO) made waves when it was reported to be in discussion with Aurora Cannabis, according to BNN Bloomberg. Both Aurora and Coca-Cola have been upfront about being interested in the potential for cannabidiol (CBD)-infused beverages. CBD is the non-psychoactive cannabinoid best known for its medical benefits. Coca-Cola's deep pockets, international presence, and branding, combined with Aurora's production potential and intricate knowledge of the marijuana industry, could make for a perfect pairing.

Of course, Coca-Cola has had discussions with a cannabis company before that didn't go anywhere, so it'd be unwise to count your chickens before they're hatched.

A dollar sign shadow cast on a pile of cannabis leaves.

Image source: Getty Images.

5. The ability to overcome share-based dilution

Finally, but perhaps the toughest task of all, Aurora will need to overcome years of rampant share-based dilution caused by numerous bought-deal offerings.

Prior to the passage of the Cannabis Act on June 19, marijuana stocks had but one means of quickly and efficiently raising a lot of capital: bought-deal offerings. A bought-deal offering involves the sale of common stock, convertible debentures, stock options, and/or warrants to a single investor or group of investors. Though these capital raises always met their goal, they also substantially increased the outstanding share count of companies that participated in them.

Following Aurora's latest purchase, and taking into account its convertible notes, options, and warrants outstanding, it could easily have more than 1 billion shares outstanding by the end of fiscal 2019 in June. Yet, it had just 16.2 million shares outstanding at the end of fiscal 2014. These added shares dilute the value of existing shareholders, as well as make it that much more difficult to turn a meaningful per-share profit. In order for Aurora to truly succeed and prove me wrong, it'll need to generate meaningful earnings per share each quarter and reduce its triple-digit forward P/E ratio.

That's the formula for success -- now let's see if Aurora Cannabis can execute on it.

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.