On one hand, the marijuana industry is primed for once-in-a-generation-type growth. After the industry logged worldwide sales of just over $3 billion in 2014, estimates suggest that annual legal cannabis revenue could hit $50 billion to $200 billion by the end of the next decade. That's a hefty compound annual growth rate that's rightly garnered the attention of Wall Street and investors.

On the other hand, the cannabis industry hasn't had time to mature, and that's been reflected in the industry's early stage operating results. Whereas Wall Street had been looking for a quick ramp-up of sales and push toward profitability, most pot stocks remain deeply in the red.

A cannabis leaf lying atop a hundred dollar bill, with Ben Franklin's eyes peering out between the leaves.

Image source: Getty Images.

However, two cannabis stocks recently reported fantastic second-quarter operating results. And no, it wasn't any of the most popular marijuana stocks, all of which remain underwater in terms of operating profitability, sans one-time benefits and fair-value adjustments.

Trulieve Cannabis

Although this should come as little surprise, given that it's one of the few marijuana stocks to have been consistently profitable over the past couple of quarters, vertically integrated, multistate dispensary operator Trulieve Cannabis (OTC:TCNNF) absolutely crushed its second-quarter results.

For the quarter, Trulieve delivered $57.9 million in sales, representing a 149% year-over-year increase, and a 30% sales bump from the sequential second quarter. According to the company, expansion of its existing store base in Florida, where Trulieve currently has 30 stores, as well as the introduction of smokable cannabis flower, drove sales growth and medical patient registration in the state. It is worth noting that the one nitpick during the quarter was the significant uptick in dried flower sales, which have traditionally lower margins and wound up pushing down gross margin from the prior-year quarter. 

However, Trulieve's focus on the Sunshine State has played a key role in keeping the company's costs down and is what's allowed the company to successfully build its brand. Because it's chosen to organically expand its brand in Florida, expenditures have grown at a very reasonable pace, and unlike most national dispensaries, Trulieve is carrying around minimal goodwill from acquisitions. This cost-disciplined approach is a big reason Trulieve is a favorite of Yours Truly.

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

Image source: Getty Images.

For its bottom line, the company benefited from a $66.2 million gain from fair-value adjustments, ultimately pushing net income up to $57.5 million in the second quarter. That's good enough for $0.52 per share. But even if this one-time gain were taken out of the equation, the company's $37.6 million in gross profit handily surpassed its $16.6 million in operating expenses.

Trulieve also stood by its previous outlook, which calls for $220 million to $240 million in sales in 2019, up from $102.8 million last year, and $380 million to $400 million in sales in 2020. All the while, adjusted EBITDA could potentially quadruple between 2018 and 2020.

Long story short, there may not be a cheaper cannabis stock on the basis of forward price-to-earnings than Trulieve Cannabis.

MediPharm Labs

The other off-the-radar pot stock that's really making a name for itself of late is third-party extraction-service provider MediPharm Labs (OTC:MEDIF).

The stage is perfectly set for extraction-service companies like MediPharm Labs to shine. Health Canada has given the green light for new derivative regulations to go into effect on Oct. 17, 2019 (the one-year anniversary of recreational marijuana's legalization in Canada), with items like edibles, vapes, concentrates, and infused beverages hitting dispensary shelves beginning in mid-December. These derivative products are significantly higher margin products than traditional dried cannabis flower, making them particularly desirable for marijuana stocks to incorporate into their portfolios.

A person holding up a vial of cannabidiol-rich liquid in front of a flowering cannabis plant.

Image source: Getty Images.

According to MediPharm's second-quarter results, it's really beginning to reap the rewards of this push toward derivatives -- and most of them aren't even legal yet. Sales from extraction contracts surged 43% from the sequential first quarter to 31.5 million Canadian dollars ($23.71 million), with gross profit clocking in at CA$11.3 million, or 34% of sales.

More importantly, even though expenses are on the rise as MediPharm expands its Barrie, Ontario, extraction facility to handle 300,000 kilos of annual extraction capacity, the company generated roughly CA$4.1 million in operating income and CA$0.01 in basic earnings per share, on a diluted basis. I know CA$0.01 probably doesn't sound like much of a profit at all, but again, remember that the real surge of derivative sales hasn't even begun yet.

MediPharm looks to have the inside track to stronger profitability as it expands its capacity in Canada. The company's press release notes that annual extraction capacity will eventually be brought to 500,000 kilos, with MediPharm landing a prime-time cannabis concentrate deal with Cronos Group during the second quarter that's worth CA$30 million over 18 months, but could be increased to CA$60 million over 24 months.

Extraction looks to be an especially smart way to play the rise of cannabidiol products, and MediPharm Labs just might be the best cannabis stock of the extraction group.