Enthusiastic pot stock investors have pushed the industry tracking Horizons Marijuana Life Sciences ETF (HMLSF 0.30%) 42% higher in 2019, but not everyone's having a good time at this party. These former high-flying marijuana stocks have disappointed shareholders that would like to what to expect in the quarters ahead.

Although they're all cannabis-related businesses, they operate in different corners of the industry. Which are near a bottom, which will probably fall further? Here's what you need to know. 

Company (Symbol) Year-to-Date Stock Performance Market Cap
Tilray (TLRY) (38%) $4.3 billion
MedMen Enterprises (MMNF.Q) (23%) $209 million
KushCo Holdings (KSHB) (11%) $422 million

Data source: Yahoo! Finance.

1. Tilray: This is not how Amazon got started

The first full quarter of recreational marijuana sales in Canada has been a disappointment across the board, and Tilray's fared worse than any of its peers.

Cheerleaders for the stock have been trying to soothe themselves by comparing Tilray's unprofitable operations to Amazon.com during its early years. Any comparisons to America's heavyweight champion of e-commerce should be treated with suspicion, though, and this one doesn't hold up to scrutiny.

It's true that Amazon raised a lot of equity to offset huge operating losses in the beginning, but Amazon's operating expenses never exceeded top-line revenue. Amazon's fourth and fifth years as a public company were probably its scariest, and operating expenses during this period only rose to 225% of the gross profit available to pay them.

TLRY Gross Profit (TTM) Chart

TLRY gross profit (TTM). Data by YCharts.

By comparison, Tilray's operating expenses reached 144% of top-line revenue in the first quarter, and operating expenses climbed to a shocking 618% of the gross profit available to pay for those expenses. To top it off, Tilray issued $475 million worth of debt in 2018, and the interest on these notes alone exceeds the gross profit that Tilray's operations are bringing in.

Unless sales double and expenses are cut in half, the company will end up chewing through its $325 million cash cushion quickly. Unfortunately, it doesn't look like its domestic market is going to meet the company halfway. March cannabis sales reached a new monthly peak, but they aren't growing very fast. Dry flower sales in March reached 7,627 kg, which was just 27 kg higher than the previous peak in December. Sales of cannabis oil broke a record in March at 7,918 liters, but it was only four liters more than Health Canada reported in January.

Three jars of dried cannabis flowers sitting on a ledge against a blackboard.

Image source: Getty Images.

MedMen Enterprises: Same problem, different country

MedMen Enterprises stock took a hit earlier this year thanks to a handful of allegations made against MedMen's present CEO by the company's former CFO. Of course, accelerating losses haven't helped, either.

During the 13-week period ended Dec. 29, 2018, which was MedMen's fiscal second quarter, revenue rose 39% over the fiscal first quarter, to $29.9 million. Unfortunately, operating expenses were 260% higher than revenue reported during the period. 

MedMen's gross margins are better than Tilray's, but the company still lost $64.6 million during the fiscal second quarter. If the company hasn't stopped bleeding money at such a frightening pace, its stock price could fall a lot further. We'll find out if MedMen has been executing its plan with any level of precision when the company reports again on May 29.

Medicinal cannabis in various packaging.

Image source: Getty Images.

3. KushCo Holdings: When a sandwich bag isn't good enough

This company supplies U.S. cannabis companies with the right packaging to comply with local laws, and it also distributes gasses and solvents used to process cannabis in an increasing variety of extracted products. KushCo Holdings also sells a lot of the vaporizer cartridges that those extracts end up in.

Despite being on top of things when it comes to marijuana packaging rules, KushCo mislabeled some contingent consideration obligations during previous quarters. The mistake is a little embarrassing, but changes made to fix the affected financial statements aren't material to any KushCo investing thesis.  

Now that the company has expanded from packaging to lower-margin businesses, gross profits during the six months ended February were just 13% of revenue, from 32% a year earlier. KushCo has complained that absorbing the tariffs it's paying to import raw materials from China is squeezing margins now, but a reprieve could be around the corner. Despite soaring revenue, the company lost $17.5 million during the six months ended February and finished the period with just $17.9 million in cash. 

Most likely to succeed?

Unless the heavy investments that Tilray and MedMen have been making suddenly start paying off, neither one of these stocks will deliver a positive return over the long run. If you're going to try catching one of these falling knives, though, KushCo Holdings is probably your best bet.