It would take a while to cover all of the connections between marijuana producers Aphria (NYSE:APHA) and Liberty Health Sciences (NASDAQOTH:LHSIF). Aphria once owned a sizable stake in Liberty. Its CEO, Vic Neufeld, is chairman of Liberty's board of directors. Aphria co-founder and executive John Cervini also sits on Liberty's board.

But despite the close ties, Aphria and Liberty Health Sciences are separate entities. And they present very different opportunities for investors. Which of these two marijuana stocks is the better buy?

Marijuana leaves with $100 bills in background.

Image source: Getty Images.

The case for Aphria

Let's first address the dark cloud hanging over Aphria. Short-sellers alleged that the company paid exorbitant prices for international businesses, with Aphria insiders profiting from the deals. Aphria has denied the allegations and appointed a special committee consisting of independent board members who joined after the disputed transaction closed to review the matter.

This scandal caused Aphria stock to plunge. It's possible that there could be further declines if it's found that the company or its management engaged in illegal or unethical activities. But Aphria will emerge from under the dark cloud at some point. For investors who anticipate that day will come sooner rather than later, there are several reasons to like the stock.

Aphria is positioned very well in Canada in both the medical and recreational marijuana markets. It has supply agreements in place for the recreational market with all of the Canadian provinces plus the Yukon territory. Aphria signed up Southern Glazer's, the biggest wine and spirits distributor in North America, as its exclusive partner in distributing its recreational cannabis products.

The international opportunities are even greater for Aphria. And it's arguably in good shape to compete on the global stage. In November, Aphria announced that it was acquiring CC Pharma, a leading pharmaceutical distributor in Germany. This deal will bolster the company's presence in the important German medical cannabis market. Aphria already has a subsidiary operating in the country.

In addition, Aphria has subsidiaries or strategic partnerships in Australia, Denmark, Malta, Italy, and Lesotho. The company also is active in Latin America, recently signing a letter of intent with pharmaceutical distributor Insumos Medicos for an exclusive supply and distribution agreement to provide medical cannabis in Paraguay.

Capacity shouldn't be an issue for Aphria. The company expects to be able to produce 255,000 kilograms of cannabis per year by early 2019. 

The case for Liberty Health Sciences

Liberty Health Sciences didn't escape the fallout from the Aphria scandal. One of the short-sellers behind the allegations concerning Aphria also issued a report citing Liberty as "just another extension of the Aphria web of highly questionable deals." Liberty quickly fired back, making a public statement that said the report "contains a number of factual errors and outdated information."

As was the case with Aphria, the attack took a toll on Liberty's share price. However, it seems likely that Liberty could recover more quickly than Aphria since the allegations involving Liberty appeared to be less serious than those against Aphria.

Aside from the recent controversy, Liberty's business seems to be rocking along quite nicely. The company holds one of only 14 cannabis licenses in the state of Florida. Arcview Market Research and BDS Analytics project that Florida's medical marijuana market will top $1.7 billion by 2022.

Liberty estimates that it currently claims a market share of around 15% in the Sunshine state. With new dispensaries added in the last few months and more on the way, the company thinks it will be able to increase its Florida market share to around 25%. The anticipated completion of the next phase of expansion of its Liberty 360 production facility in early 2019 will likely help Liberty in achieving its goal.

While Florida presents a tremendous opportunity, Liberty is also expanding into another state. The company teamed up with real estate developer Schottenstein Group on a joint venture that plans to open a medical cannabis dispensary in Dayton, Ohio, by the end of March 2019. In addition to the dispensary, the joint venture will operate a 10,000-square-foot processing facility to be used for extraction, refining, formulation, and packaging.

Better buy

Aphria's market cap stands at around $1.5 billion. Despite the allegations of improprieties that have weighed on the stock, I think that Aphria could deliver solid returns in the future. And the stock could skyrocket if Aphria is picked as a partner by a major company outside of the cannabis industry.

But my view is that Liberty Health Sciences presents a more appealing proposition. Assuming the company can achieve its goal of capturing 25% of the Florida market, Liberty is on track to generate more than $400 million in annual sales in a few short years. And that doesn't include its Ohio operations or any other future expansion efforts.

Even if Liberty doesn't quite boost its Florida market share as much as it hopes to, the company should still dramatically increase its revenue over the next several years. With Liberty's market cap below $300 million, I think this beaten-down marijuana stock looks like a bargain right now. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.