What happened

Shares of Innovative Industrial Properties (NYSE:IIPR) declined 17.7% in October, according to data from S&P Global Market Intelligence. The stock's return was also negative 17.7%, since no dividends were paid during the month.

The San Diego-based company is a real estate investment trust (REIT) specializing in properties used for growing and processing cannabis in U.S. states where medical marijuana is legal.

For context, the S&P 500 index returned 2.2% last month.

Interior of a large cannabis greenhouse

Image source: Innovative Industrial Properties.

So what

We can attribute Innovative Industrial stock's subpar showing in October to continued weakness in the overall cannabis sector rather than to company-specific happenings. Last month, for instance, shares of leading Canadian cannabis growers Canopy GrowthAurora Cannabis, and Cronos declined 13%, 18.2%, and 9.3%, respectively.

While Innovative Industrial's stock has been dragged down over the last few months by sector weakness, the fast-growing company continues to post great quarterly numbers. In the second quarter, its revenue soared 155% year over year to $8.28 million, earnings per share (EPS) jumped 76% to $0.30, and adjusted funds from operations (FFO) per share -- a key profitability metric for REITs -- surged 90% to $0.59. 

Now what

After its recent big pullback, Innovative Industrial Properties stock is trading at 23.7 times its forward earnings, so it's looking quite interesting. This is a compelling valuation for a company with its growth dynamics. 

Investors should be getting material news soon, as the company is slated to report its third-quarter results on Wednesday, Nov. 6, after the market closes. 

Wall Street is looking for EPS of $0.47 on revenue of $10.7 million, representing growth of 124% and 174%, respectively, year over year. Strong earnings growth typically translates to robust FFO growth.