Everyone talks about how much the cannabis industry is going to grow over the next few years. But there are quite a few cannabis stocks that are delivering impressive sales growth right now.
I looked at the trailing-12-month revenue growth for the stocks of all cannabis-related companies with a market cap of at least $200 million. Here are the three stocks with the fastest-growing sales -- and whether they're smart picks to buy right now.
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1. GW Pharmaceuticals
Before GW Pharmaceuticals (GWPH) launched Epidiolex, some questioned if the company could really be successful with its new cannabidiol (CBD) drug. GW has answered those questions with an exclamation mark. The cannabinoid-focused biotech's trailing-12-month revenue has skyrocketed by 758% over the last year.
The company has blown away sales estimates in every quarter since Epidiolex hit the U.S. market late last year. Epidiolex continues to pick up momentum, generating twice the sales in the second quarter than it did in the first quarter of 2019.
GW hasn't encountered significant problems with payers. Around 93% of Americans with commercial, Medicaid, or Medicare health plans have coverage for Epidiolex. Physicians are lining up to prescribe the drug, with more than 2,500 physicians prescribing Epidiolex since its launch. GW also stated in its Q2 update that most of the 12,000 patients who have received Epidiolex are still taking the therapy.
2. Aphria
You might call Aphria (APHA) the "comeback kid" of Canadian cannabis producers. The company went through some trying times in 2018 and early this year. But Aphria's trailing-12-month revenue growth of 417% is the best in its industry.
Aphria actually reported disappointing sales results for its third quarter of fiscal 2019 in April. The main problem was the company's limited production capacity. This wasn't a serious issue in Q4, though, with Aphria announcing sales growth of 158% quarter over quarter in the adult-use recreational marijuana market.
However, the biggest factor behind Aphria's tremendous sales growth isn't coming from its Canadian operations. Aphria's acquisition earlier this year of German medical cannabis and pharmaceutical distributor CC Pharma is the primary driver of its sales growth. In the fourth quarter, CC Pharma contributed more than three-fourths of Aphria's total revenue.
3. HEXO
HEXO (HEXO) is another Canadian cannabis producer that's beating the big players when it comes to sales growth. Over the last year, HEXO delivered trailing-12-month revenue growth of 245%.
As you might expect, the Canadian adult-use recreational marijuana market is fueling HEXO's sales growth. But that growth isn't as strong as it could be. The company has been constrained by its production capacity. This issue shouldn't be as problematic going forward, though, with HEXO's new 1 million-square-foot facility opening in April.
HEXO predicts that its net revenue will double in its next quarterly update thanks to much higher production capacity. The company's acquisition of Newstrike Brands will eventually increase its annual production capacity to 150,000 kilograms, making HEXO one of the top Canadian producers based on capacity.
Are they buys?
I have been a big fan of GW Pharmaceuticals over the last couple of years. My view was that Epidiolex would be a solid commercial success. So far, my optimism has been proven right. While I still like the company's prospects, I think that much of the expected growth for Epidiolex is already baked into the share price. I'd like to see some positive pipeline progress from the biotech before jumping back aboard the GW Pharmaceuticals train.
Aphria is a stock that I think doesn't get enough respect from investors. The company ranks near the top of the industry in terms of production capacity. Aphria has solid international operations, particularly in Germany. I also like interim CEO Irwin Simon's steady hand running the company. My take is that Aphria is a stock that's definitely worth considering for aggressive investors.
I'm also bullish about HEXO. The company should be in a good position to succeed in the cannabis beverages, edibles, and vapes market when it opens for business later this year. I look for HEXO to land another major partner from outside the cannabis industry in addition to its relationship with Molson Coors Brewing. HEXO isn't consistently profitable yet, but I like the long-term prospects for this up-and-coming cannabis producer.
