Few industries have investors seeing green quite like legal marijuana. After generating "only" $10.9 billion in worldwide sales in 2018, a new report from Arcview Market Research and BDS Analytics suggests that global licensed-store sales could nearly quadruple over the next six years. Once supply-side issues die down throughout North America, it should pave the way for a number of marijuana stocks to earn healthy profits.

However, the expectation of exceptionally fast sales growth and eventual profitability for a handful of pot stocks has sent most cannabis company valuations significantly higher over the past couple of years. As a result, most are quite pricey, based on traditional fundamental metrics.

But there are a small number of marijuana stocks that appear to be book-value bargains. Book value takes into account a company's assets minus its outstanding liabilities. And while it's by no means an end-all in determining value, it's one piece of a big puzzle that can help investors identify value. Let's take a closer look at three book-value bargain pot stocks to see if there's real value to be had or if they're nothing more than wolves in sheep's clothing.

A hand holding a magnifying glass over a company's balance sheet.

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iAnthus Capital Holdings: 0.80 price-to-book (P/B)

On the surface, vertically integrated dispensary operator iAnthus Capital Holdings (ITHUF) looks like the steal of the year at just 80% of its book value.

Following the completion of its mammoth acquisition of MPX Bioceutical earlier this year, iAnthus now has retail licenses to open as many as 68 stores in nearly one dozen U.S. states. Since the United States is the crown jewel of the cannabis movement, the expectation is that iAnthus should see rapidly rising sales as new retail stores open. Also, once its acquisition of CBD for Life closes -- CBD for Life's products are currently being distributed in over 1,000 retail locations -- iAnthus' sales should see a nice boost. 

But there are also two glaring reasons behind this stock's relative "cheapness," which can be uncovered with a quick glance of its complete income statement, filed with SEDAR. First, iAnthus' current assets of 84.7 million Canadian dollars are lower than its current liabilities of CA$106.7 million, implying that the company will need to raise capital to meet its financial obligations over the next 12 months. That usually means issuing stock and diluting existing shareholders.

Secondly, and perhaps more worrisome given that raising money hasn't been much of an issue for pot stocks, iAnthus' goodwill totals CA$555.4 following its MPX acquisition, which represents 70% of the company's total assets. Such a high percentage of goodwill puts iAnthus Capital at significant risk of a big future writedown that could wipe out some of its currently recognized shareholder equity. The company's low P/B looks to be a reflection of this inherent risk.

A physician, with a stethoscope around his neck, holding a small baggie filled with cannabis in his left hand, and cannabis oil capsules in his right hand.

Image source: Getty Images.

Aleafia Health: 0.86 P/B

Aside from iAnthus Capital, the only other pure-play marijuana stock currently trading below its book value is Aleafia Health (ALEAF 10.22%).

Aleafia Health made noise earlier this year when it acquired Emblem in an all-stock deal, thereby combining two companies that shared the same business philosophy. These cannabis growers run a combined 40 medical clinics that've served over 60,000 patients and, when capacity expansion is complete, the Aleafia-Emblem duo should be capable of 138,000 kilos a year of production. The idea being that medical cannabis patients tend to generate much better margins than recreational users, so if Aleafia can keep medical patients within its network and buying its in-house-grown product, it can be quite successful.

So, why has Aleafia's stock hit the skids, relative to book value? One answer might be the company's goodwill relative to total assets. While not as high as iAnthus, Aleafia does recognize CA$186.6 million in goodwill following its Emblem deal, which is 44.4% of its CA$420.8 million in total assets. Such a high percentage of goodwill representing total assets could portend a future writedown that reduces shareholder equity.

The other issue might be that Aleafia Health is a relative unknown. In order to move 138,000 kilos, and complete the buildout of its existing grow farms, it's going to burn through quite a bit of capital, and it'll need to secure a number of domestic and international supply deals. Relative to iAnthus Capital, I view Aleafia Health as being the more attractive of the two from a value perspective, but wouldn't rule out future dilutive capital raises.

A large dispensary store sign with a cannabis leaf and the word dispensary written underneath it.

Image source: Getty Images.

MedMen Enterprises: 1.31 P/B

A third book-value bargain in the cannabis industry is upscale multistate dispensary operator MedMen Enterprises (MMNF.Q). MedMen is currently valued at just 31% more than its book value.

What MedMen brings to the table is one of the highest licensed-store counts in the U.S., assuming its proposed $682 million acquisition of privately held PharmaCann closes in the second half of this year. On a pro forma basis (i.e., including PharmaCann's assets), MedMen has 37 open dispensaries, which is second only to Curaleaf Holdings' 45, and it has 86 retail licenses -- good enough for fourth-highest among dispensary operators. As a company focused on normalizing the cannabis buying experience, MedMen has generated sales per square foot in its oldest California locations that have rivaled highly successful Apple stores. 

If you're wondering why MedMen is getting no love from Wall Street, the answer likely boils down to two issues. For starters, MedMen is lugging around $108.2 million in goodwill (MedMen reports in U.S. dollars), which represents almost 20% of its $552.1 million in total assets. Though this isn't as high of a percentage as Aleafia Health and iAnthus Capital, it's bound to go higher once the mammoth PharmaCann deal is complete. Essentially, MedMen's book-value discount could represent Wall Street's growing expectation that it won't recoup the premium it's paid for acquisitions.

The second concern is that MedMen has been losing money hand over fist. The company's fiscal third-quarter report, released in May, featured a loss from operations of $53.3 million, with an operating loss of $178.4 million in the first three quarters of 2019. Even with plenty of cash on hand, MedMen cannot continue to bleed this much capital each year without its stock being shrouded in pessimism.

From what I can see on MedMen's income statement, skepticism is fully warranted.

Of the three book-value bargains listed here, it's Aleafia Health that looks to be the most attractive.