A once-promising 2018 is ending in disappointment for OrganiGram Holdings (OGI 0.69%) and Aphria (APHA). OrganiGram stock was up more than 90% at one point during the year, while Aphria started off 2018 jumping more than 25%. Now, though, OrganiGram's shares appear likely to finish the year with a small loss. Aphria's loss will be much worse, even with shares rebounding from a hostile takeover attempt by U.S. marijuana producer Green Growth Brands

But what might the future hold for these two Canadian marijuana stocks? And which is the better buy now? Here's what you need to know about OrganiGram and Aphria.

Marijuana leaf on top of U.S. cash

Image source: Getty Images.

The case for OrganiGram

There are two primary reasons to consider buying OrganiGram. First, the stock is a bargain compared with most of its peers. Second, it is well positioned for tremendous growth in 2019 and beyond.

Shares of the marijuana producer currently trade at 26 times earnings. This P/E multiple might seem high if you stack it up against most stocks' valuations. But for a marijuana stock, OrganiGram appears to be a steal. P/E multiples can't even be used for most of the company's rivals because they continue to lose a lot of money. Not OrganiGram. It delivered a healthy profit in its latest quarter along with strong sales growth.

Its growth prospects make its valuation even more attractive. The company expects that revenue for the first quarter of fiscal year 2019 (which ended on Nov. 30, 2018) will be greater than its revenue for all of fiscal 2018. And it should get even better from there, considering that Canada's recreational marijuana market didn't open until Oct. 17, 2018.

Based on early sales results, OrganiGram thinks that it has the leading market share in New Brunswick, Nova Scotia, and Prince Edward Island. The company also has solid sales in Alberta, Manitoba, Newfoundland, and Ontario. The only Canadian province where it doesn't have a supply deal or listing agreement is Quebec.

Increasing its production capacity will be crucial for OrganiGram to achieve its potential. That shouldn't be a problem, though. The company has already completed expansion projects that boost its capacity to 36,000 kilograms per year at full utilization. It expects to increase that total to 119,000 kilograms annually by October 2019. 

While the Canadian recreational marijuana market will be the primary growth driver for OrganiGram, the company also could benefit from international markets. It has partnered with Alpha-Cannabis Germany with plans to supply medical cannabis products in Germany. It also invested in Eviana Health, which has hemp operations in Serbia.

The case for Aphria

Why buy Aphria stock? For pretty much the same reasons that OrganiGram looks attractive -- but with an important caveat.

Aphria also appears to be a relative bargain right now. Like OrganiGram, it has delivered profits. Its shares currently trade at around 49 times earnings.

But Aphria's relatively attractive valuation stems from the beating the stock has taken in recent months. Its shares fell with the broader sell-off in Canadian marijuana stocks that began in October, and then plummeted in December after short-sellers alleged that the company drastically overpaid for international acquisitions that profited key Aphria insiders.

In response to the allegations, Aphria appointed a committee of independent members of its board of directors to investigate. While the committee's findings haven't been announced yet, Aphria's share price has stabilized. Assuming that serious issues aren't identified, investors' focus should return to the company's prospects -- which continue to be really good.

Aphria should be on track to claim the third-largest production capacity among Canadian marijuana growers. The company expects to have an annual production capacity of 255,000 kilograms by early 2019 with its expanded Aphria One facility and new Aphria Diamond facility.

While OrganiGram still hasn't landed a supply deal in Quebec, Aphria has secured supply agreements with all of Canada's provinces plus the Yukon territory. The company's partnership with large alcoholic beverage distributor Southern Glazer's gives it a solid retail presence throughout Canada.

Aphria is also poised for international growth. The company recently announced the acquisition of CC Pharma, a leading pharmaceutical distributor in Germany, a move that firms up Aphria's presence in the important German medical cannabis market. It has also been busy lining up supply agreements in Latin America.

Better buy

I think that Aphria is likely to bounce back significantly in 2019. But will the hostile takeover attempt by Green Growth Brands succeed? I'm not so sure. If Aphria can move past the cloud hanging over its head resulting from the short-seller allegations, its stock could be worth a lot more over time than the 46% premium that Green Growth is offering. 

My view is that OrganiGram is the safer pick. It should enjoy strong revenue and earnings growth in the coming year. I suspect that its efforts to expand internationally will gain some traction. And I think it's entirely possible that a major alcoholic beverage maker or tobacco company could choose OrganiGram as its cannabis partner.

OrganiGram shares the tremendous growth prospects that Aphria does -- but without the baggage and with a more attractive valuation. In my opinion, that makes it a better buy for now.