Canadian marijuana producers have entered a new era. After several years of supplying medical marijuana nationwide, they have begun moving into Canada's recreational marijuana market, which opened on Oct. 17. Two of the biggest companies in both medical and recreational markets are Aurora Cannabis Inc. (NASDAQ:ACB) and Canopy Growth Corporation (NASDAQ:CGC)

So far in 2018, it hasn't been much of a contest between Aurora and Canopy when it comes to stock performance. Canopy's share price has soared three times higher than Aurora's has. But which of these two Canadian marijuana stocks is the better buy for investors now?

Marijuana leaf on top of $100 bill

Image source: Getty Images.

The case for Aurora Cannabis

Perhaps the most important prerequisite for success in the cannabis industry is capacity. If a cannabis producer doesn't have product to sell, it won't make money. Aurora certainly has no problems in this area. In fact, the company is likely to claim the largest production capacity of all marijuana growers over the next couple of years.

Right now, Aurora is able to grow around 45,000 kilograms (92,208 pounds) per year. But that will jump to more than 150,000 kilograms per year by the end of 2018. By the middle of 2019, Aurora expects to have an annual production capacity totaling more than 500,000 kilograms.

While capacity is important, it's also critical to have places to ship what is produced. Again, Aurora is in good shape. The company has supply agreements for the recreational marijuana market with nine provinces that combined represent 98% of Canada's population. 

Aurora Cannabis is also well-positioned in international medical marijuana markets. It has a significant presence in Germany, the largest European market. The company formed subsidiaries in Denmark and Italy. Aurora also is focusing on multiple other medical cannabis markets across the world, including Australia, the Cayman Islands, Colombia, and Malta.

The stock could get a boost soon from increased visibility to U.S. investors. Aurora's shares will trade on the New York Stock Exchange effective Oct. 23, 2018. And there is a wild card that could serve as a major catalyst for the stock. Aurora has reportedly been in discussions with Coca-Cola about partnering to develop cannabis-infused beverages.

The case for Canopy Growth

Canopy Growth appears to be sitting pretty on several fronts, too. The company doesn't talk about its capacity in terms of kilograms per year. However, Canopy claims 4.3 million square feet of growing space licensed for production, with another 1.3 million square feet of growing space on the way. It's probably fair to say that Canopy will be able to grow at least 500,000 kilograms annually. 

Like Aurora, Canopy won't have to worry about where to ship the cannabis it produces. The company has supply agreements in place with every province that has finalized supply plans. As of August, Canopy had a 36% share of total volume of supply agreements signed up to that point.

The company is very active in international medical marijuana markets as well. Canopy's Spectrum subsidiaries operate in Germany, Denmark, the Czech Republic, Australia, Chile, Colombia, and Lesotho. The company also has partnerships in other countries.

Probably the most important differentiator for Canopy Growth, though, is its relationship with Constellation Brands. The big alcoholic-beverage company bought a 9.9% stake in Canopy last year and announced a partnership to develop cannabis-infused beverages. Constellation jumped in even more in August, investing a whopping $4 billion in Canopy and increasing its stake to 38%.

Thanks to this massive influx of cash, Canopy is now poised to go on a shopping spree. Founder and co-CEO Bruce Linton said that the company is interested in potentially buying bottling operations in Canada and perhaps a "down on their luck" biotech. Canopy recently announced that it was acquiring the assets of Colorado-based hemp researcher ebbu Inc.

Better buy

In many respects, Aurora Cannabis and Canopy Growth match up fairly evenly. But while Aurora still awaits a major partnership with a big company outside of the cannabis industry, Canopy already has one. The old saying that a bird in the hand is worth two in the bush appears to be relevant when comparing these two companies. Primarily for this reason, I think that Canopy is the better pick.

Investors should keep in mind, though, that both Aurora and Canopy already have massive growth expectations priced into their stocks. It's quite possible that those expectations won't be met -- at least over the next few years. Over the long run, my view is that Canopy should be a key leader in the global cannabis industry. But it could be a bumpy ride.

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.