As the second half of the year begins, the long-term outlook for the marijuana industry continues to blossom. A relatively new report ("State of the Legal Cannabis Markets") from the duo of Arcview Market Research and BDS Analytics finds that worldwide licensed dispensary sales are on track to grow from $10.9 billion in 2018 to $40.6 billion by 2024. That's a compound annual growth rate of bit over 24% over this six-year period.

But here's the real kicker: This figure doesn't even include cannabinoid-based pharmaceutical sales or cannabidiol sales outside of licensed dispensaries, which could be a huge market in the United States. Suffice it to say, there's plenty of potential for cannabis investors to make money over the long run.

An investor writing and circling the word buy underneath a dip in a stock chart.

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Despite this potential, marijuana stocks have had a rough go of things in the second quarter. Supply issues in the U.S. and Canada, along with a persistent black-market presence, have sapped near-term sales and profit projections for most pot stocks. Of course, this could also mean that bargains abound.

In July, I view one small-cap marijuana stock as the most attractive in the entire cannabis landscape, which makes it my top marijuana stock to buy this month. Ladies, gentlemen, and investors alike, I'd like to direct your attention to U.S. dispensary operator Trulieve Cannabis (OTC:TCNNF).

Four reasons Trulieve Cannabis is down considerably since early April

Let's begin by addressing the reasons behind Trulieve's more than 30% decline since early April. The way I see it, there are four variables that could be causing concern among Wall Street and investors.

The first worry likely revolves around the company's expected lock-up expiration for approximately 75.5 million shares. This lock-up, which disallows insiders from selling any of their holdings for a period of 180 days following a public offering, was extended voluntarily by insiders for a period of six months in mid-January. This halted all sales of insider stock prior to July 25, 2019. But with Wall Street having witnessed the carnage on Tilray's lock-up expiration, there's clear worry that insider selling could put pressure on Trulieve's share price within a few weeks. 

Two miniature shopping carts, with one holding a cannabis flower and the other containing vials of cannabis oil.

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Secondly, competition is picking up in Trulieve's home market of Florida. With 29 of the company's 31 open dispensaries in that state, any brand-name competition is unwelcome.  Curaleaf Holdings has around half of its open dispensaries in Florida -- Curaleaf leads all dispensary operators in terms of operational retail stores -- while MedMen Enterprises has announced plans to enter Florida with up to 30 stores. These well-known brands have the potential to steal market share from Trulieve.

Thirdly, there's the growing possibility that Florida may have a recreational marijuana legalization amendment on the ballot in 2020. Without the need for a medical card to buy most cannabis products, Trulieve would have to reestablish its brand dominance in Florida all over again (albeit with far more competitors this go-around).

Fourth and finally, I believe there's likely concern about Trulieve pushing into markets outside of Florida. Acquisitions have allowed the company to establish a presence in California, Massachusetts, and Connecticut. But let's be honest, Trulieve is starting from scratch in these other states. Thus, building its brand and launching new stores could be a costly venture that pushes expenses higher and margins lower in the near term.

In my opinion, this summarizes why Trulieve Cannabis has declined in recent months. Now, let's look at why I believe it's the best cannabis stock you can buy in July.

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

Image source: Getty Images.

Here why Trulieve Cannabis is an absolute steal of a deal

Let's start by circling back to the basics: Trulieve's Florida market dominance.

Back in April, Trulieve announced that 65% of all milligrams of medical cannabis dispensed in the Sunshine State were by its stores. As a seed-to-sale operator, it has more than 600,000 square feet of cultivation space that'll soon move to over 700,000 square feet, allowing for close to 38,000 kilos of annual run-rate production.

More important, by focusing on building its brand in its home market, which includes a variety of more than 170 stock keeping units (SKUs), the company has been able to keep costs down. Instead of spreading itself thin like Curaleaf and MedMen, which are attempting to open stores, grow farms, and processing sites, in one dozen states (each), Trulieve has remained laser-focused on what should be one of the most successful marijuana markets by 2024.  Though it won't be a national name, its brand building in Florida has paid off in the form of lower expenses.

What's more, medical marijuana consumers tend to be just what the doctor ordered (pardon the pun) for cannabis companies. When compared to adult-use consumers, medical patients use marijuana more frequently, buy product more often, and usually gravitate toward derivatives, which are a higher-priced, higher-margin product than traditional dried cannabis. Or, to put this in another context, more than 90% of the company's open dispensaries are in a market focused on high-margin medical pot patients.

Two rows of dried cannabis buds lying atop neatly arranged hundred-dollar bills.

Image source: Getty Images.

That brings me to the next point: profitability. Trulieve Cannabis is one of maybe four pure-play pot stocks that's profitable on a recurring basis. And we're not talking about Trulieve eking out a profit or leaning on fair-value adjustments for its gains. This is a company that's been very profitable on an operating basis, and looks to expand its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the years to come.

In the company's first-quarter earnings release, Trulieve guided to a range of $220 million to $240 million in 2019 sales, up from $102.8 million last year, and $380 million to $400 million in 2020. Furthermore, adjusted EBITDA (not including fair-value gains on biological assets) is expected to increase from $45.6 million in 2018, to a range of $95 million to $105 million in 2019, and lift to between $140 million and $160 million in 2020. 

Bring everything together -- the company's Florida opportunity, its potential to grow in billion-dollar markets like California and Massachusetts, and its medical focus -- and it's no surprise that Trulieve has the lowest forward price-to-earnings ratio of any marijuana stock. The company's forward P/E of 12.4 is more than 25% lower than the forward P/E of the S&P 500, despite the fact that sales and adjusted EBITDA will basically quadruple in a two-year span.

As for the remainder of the worries, they're likely overblown. Lock-up expirations are a very short-term event, and it's unlikely that Trulieve will cede too much market share in Florida, even if recreational marijuana gets the green light in 2020 or beyond. Pound for pound, Trulieve Cannabis is a fundamental steal, and thus the top marijuana stock to buy in July.