There are a lot of pot stocks to choose from, and Cresco Labs (OTC:CRLBF) sometimes gets lost in the crowd. At a market cap of less than $1 billion and trading volumes often below 300,000, it's not a real attention-grabber. However, that could be a missed opportunity for investors.

Operational in seven states and expanding

Chicago-based Cresco Labs has been steadily expanding its reach across the country and is slowly becoming a large, multistate operator. Last month, the company released its latest quarterly results, which showed tremendous sales growth, with revenues of $29.9 million rising by 253% from the $8.5 million in sales it generated in the prior year.

As good as that is, the company is going to get even bigger once its acquisition of Origin House (OTC:ORHOF) goes through, which will give Cresco a large distribution network to tap into in California. To help put it into perspective, in its most recent quarter, Origin House's sales topped CA$21.4 million in just the last three months. Its acquisition of Origin House is expected to be completed before the end of this year. When it was announced earlier this year, the all-stock deal was valued at about CA$1.1 billion, making it the largest public company acquisition to date in the U.S. cannabis industry.

Cannabis buds in a bowl sitting on top of cash.


In addition to a growing presence in California, Cresco is also in the process of acquiring licenses in New York, Massachusetts, and Florida that will expand its reach even further. Michigan is another state it already has the green light for, meaning that in total, Cresco will have a presence in 11 states across the country.

Seed-to-sale process control

One of the big advantages for Cresco is that it has control over the entire process as the company has 23 production facilities and 22 dispensaries across multiple states (including acquisitions still pending approval). From cultivation to the in-store experience, Cresco can provide customers with consistent, high-quality products and services. It's something that many other cannabis companies can't do because they typically control only one part of the process.

Cresco also makes an effort to educate users so that they are making the best decisions possible. On the company's website, the company has a substantial amount of information on various different subjects, ranging from generic information to different ways to consume cannabis as well as links related to medical marijuana research and studies that have been done.

The business is already sustainable

Cresco is expanding without breaking the bank. Although it posted a loss in its most recent quarter, if not for a hefty income tax bill of $5.6 million, the company would have landed in the black, as its pre-tax profits were $1.7 million.

Operating income of $4.3 million was a significant increase of 170% from last year's tally of just $1.6 million. With its calculated approach, Cresco has found a way to build and grow its operations throughout the U.S. without spreading itself too thin. Although Cresco did post a profit in 2018 with the help of changes in fair value, with Origin House posting some significant losses, it might not be as easy getting back to profitability once that acquisition is complete.

Why Cresco is a solid buy today

Cresco's share price has risen more than 20% year-to-date, but the stock is still fairly small at a market cap of just $1 billion, which is much smaller than other cannabis operators that are not as strong financially. At a price-to-sales ratio of less than 12, it's a fairly cheap buy compared to some of its peers. However, as its revenues continue to rise, Cresco might not be a cheap stock for much longer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.