Despite recently crossing above 3,000 for the first time in its storied history, the broad-based S&P 500 (SNPINDEX:^GSPC), which as its name suggests takes into account the weighted-average share price movements of around 500 companies, isn't all that pricey. According to data provided by The Wall Street Journal as of this past Monday, July 22, the S&P 500 was valued at a reasonable 18 times forward earnings (i.e., next year's profit projections).

Traditional value is very difficult to find in the cannabis industry

By comparison, you'd struggle to find traditional value among cannabis stocks, which are almost always purchased for their long-term sales growth potential, rather than their near-term potential for profits.

Two rows of dried cannabis buds partially covering neatly arranged one hundred dollar bills.

Image source: Getty Images.

Making matters more challenging for marijuana stocks is the fact that supply challenges in Canada, and high tax levels in the U.S., have constrained pot stock sales and profitability throughout North America. Supply-side challenges in Canada are unlikely to be resolved anytime soon, and high tax rates in key markets like California offer no immediate solutions to a persistent black-market presence. This has meant that pot stock profit estimates for 2019 and 2020 have been coming down across the board.

On the bright side, there are still quite a few cannabis stocks expected to generate a profit in fiscal 2020 (I say "fiscal 2020," because not all marijuana stocks run on a standard calendar year). But given the great number of uncertainties throughout the industry, and fluid situation regarding tax rates in the U.S. and supply issues in Canada, few trade at levels that would be viewed as fundamentally attractive.

However, there are two pot stocks that currently trade below the forward price-to-earnings ratio (P/E ratio) of the S&P 500, which is pretty impressive considering that cannabis stocks should deliver substantially higher sales growth than the average top-line growth rate of the S&P 500 over the next year. Let's take a deeper dive into these true marijuana value stocks.

Trulieve Cannabis

As has been the case for quite some time now, U.S.-focused, vertically integrated dispensary stock Trulieve Cannabis (OTC:TCNNF) is the cheapest pot stock on the planet, at least in terms of forward P/E ratio, at just over 11 times next year's consensus earnings per share.

Although most multistate cannabis operators have been busy pushing into as many legalized states as they can, thereby spreading themselves, and possibly their brands, thin, Trulieve Cannabis has planted itself firmly in its home market of Florida. About a month ago, Trulieve opened its 29th retail location in the Sunshine State, which is more than other, bigger dispensary operators, such as Curaleaf Holdings, have open in Florida. Trulieve may not have as many nationally open retail locations as MedMen Enterprises or Curaleaf on a pro forma basis, but it's far more centralized, leading to a lower cost structure and more effective branding.

Two miniature baskets, with one holding a cannabis flower, and the other containing vials of cannabis oils.

Image source: Getty Images.

Trulieve has abundant opportunities down the road, too. It's my expectation that Florida will aim to put a recreational cannabis amendment on its 2020 ballot for vote, which could open the door to a new group of consumers. Sure, it'll mean that Trulieve will have to shift its advertising and product mix a bit, but there's plenty of value to be had from the medical and recreational side of the equation.

Furthermore, Trulieve has a presence in California, Connecticut, and Massachusetts, the former of which is the biggest cannabis market in the world, and the latter of which could become a billion-dollar market within five years. Ramping up its brand in these new markets will take time, but it has its successful Florida blueprint to fall back on as a reference.

According to the company, it's on track to more than double sales in 2019 to a range of $220 million to $240 million, up from just shy of $103 million in 2018, and will see sales surge to as much as $400 million in 2020. All the while, EBITDA could fly to a range of $140 million to $160 million by 2020, which is almost quadruple 2018 levels (not including fair-value adjustments on biological assets). Suffice it to say, there's a reason Trulieve Cannabis was my top cannabis stock for July

Village Farms International

On the other hand, my opinion of Village Farms International (NASDAQ:VFF) hasn't, admittedly, always been positive. But as the cannabis industry has evolved, so has my view of the company, which currently sports a forward P/E ratio of just over 15.

Village Farms offer investors a three-pronged approach to make money. First, it formed a joint venture with Emerald Health Therapeutics (OTC:EMHTF), known as Pure Sunfarms, in 2017. The idea here was that Village Farms had existing vegetable-growing greenhouses that could be sold to the joint venture that it was a 50-50 partner of, and Emerald Health could handle the financing and application of the retrofit process for cannabis production. In April, Pure Sunfarms acquired a second 1.1-million-square-foot facility from Village Farms. Combined, these two facilities should each produce at least 75,000 kilos a year for a combined 150,000 kilos. 

An up-close view of a flowering cannabis plant in an indoor grow farm.

Image source: Getty Images.

One of my biggest concerns with Village Farms has always been its yield per square foot, and not its aggregate output of at least 150,000 kilos, when at full capacity. With 2.1 million square feet of growing space (about 100,000 square feet is devoted to a nursery and other operations on a combined basis), Emerald Health and Village Farms' joint venture is forecast to produce at a yield per square foot (about 71 grams per square foot) that's lower than many of its peers. Then again, with plenty of growing experience, this production estimate is probably one of the most believable in an industry that's challenging investor trust and expectations.

Secondly, Village Farms has its burgeoning hemp operations, which is the primary reason I believe this company is worth a closer look. The passage of the farm bill in the U.S. in December opens the door to industrial hemp production and hemp-derived cannabidiol (CBD) products, CBD being the nonpsychoactive cannabinoid best known for its perceived medical benefits. In 2019, Village Farms' two hemp joint ventures have planted nearly 600 acres and 120 acres of hemp, and it has 5.7 million square feet of greenhouses in West Texas that could eventually be transitioned to hemp production from vegetable-growing.

Finally, there's Village Farms' vegetable-growing greenhouses. Although this tends to be a low-margin business model, it usually generates fairly predictable cash flow -- and Wall Street likes predictability.

Investors simply won't find cheaper pot stocks than Trulieve and Village Farms right now.