Canada's top marijuana stocks, Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), have already listed shares on the New York Stock Exchange to attract more long-term institutional investors. On Monday, they're joined by CannTrust (NYSE:CTST), a smaller and lesser-known cannabis company targeting 100,000 kilograms of marijuana production.

Is CannTrust a buy? Here's why CannTrust could be a top pot stock to own following its listing on the NYSE.

Canada's market opportunity

Canada's national pro-pot laws make it home to the world's largest publicly traded cannabis companies. However, many U.S. institutional investors are prohibited from owning foreign stocks, so they've been unable to invest in this industry. That's changing thanks to decisions by the New York Stock Exchange and NASDAQ to approve applications allowing Canadian companies to co-list on their exchanges. 

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Canada's marijuana market is worth $6 billion Canadian dollars. While most of that spending happens in the black market, a recreational, adult-use marketplace opened nationwide in October. Sales were hampered by marijuana supply shortages early on; however, legal recreational sales have been growing steadily. In December, recreational sales in Canada were CA$55 million, bringing total sales to CA$152 million since adult-use market sales began on Oct. 17, according to Statistics Canada.

Canada's two largest marijuana companies, Canopy Growth and Aurora Cannabis, captured about half of those sales, leaving nearly half of the market remaining for other marijuana stocks, including CannTrust. Canopy Growth's recreational sales were CA$58 million in the fourth quarter, giving it a 38% market share, and Aurora Cannabis' recreational sales were CA$21.6 million, giving it 14% market share.    

It remains to be seen which of Canada's second-tier marijuana growers captured the remainder of the market share, but CannTrust could certainly have challenged better-known peers Aphria (NYSE:APHA) and Tilray (NASDAQ:TLRY). In Q3 2018, CannTrust's CA$12.6 million in revenue trailed Tilray and Aphria's comparable quarters only slightly. Tilray's revenue was CA$12.9 million in Q3, while Aphria's revenue was CA$13.3 million during the quarter ended August 2018.

A bargain worth buying

CannTrust has a shot at being one of Canada's most profitable pot stocks. The company's gross margin, excluding unrealized gains on changes in the fair value of biological assets, was 69% in the third quarter. By comparison, Aphria and Tilray's gross margins in the most comparable quarters were 64% and 31%, respectively.

A big reason CannTrust is producing top-tier margins is its product mix. Dried marijuana flower sells for less than value-added extracts, including cannabis oils, and those extracts represent a larger share of sales at CannTrust than its peers. An impressive 52% of its revenue came from margin-friendly extract sales in the third quarter. In the quarter ending August 2018, extracts accounted for 39% of Aphria's revenue, and in Q3 2018, they accounted for 45% of Tilray's sales.

The better profitability appears to make CannTrust a relative bargain. It boasts a $1 billion market cap, while Aphria and Tilray's market caps are $2.5 billion and $7.4 billion, respectively. As a result, CannTrust's price-to-sales ratio is much lower than those of both of those companies.

CNTTF PS Ratio (TTM) Chart

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Admittedly, no one is going to confuse any of these marijuana stocks with a traditional value stock. Marijuana companies are plowing big money into new facilities so they can produce increasingly more product to serve Canada and beyond, and that means operating profit could be hard to come by for a while.

Nevertheless, CannTrust is growing at a triple-digit rate, it offers impressive gross margins because of an industry-leading profit mix, and it's relatively undervalued compared to its peers. Given Canada's marijuana market is worth billions of dollars per year in sales and global spending on marijuana tops $150 billion, according to the United Nations, I think CannTrust is worth owning in small-cap growth portfolios now that it's trading on the NYSE.