Despite the fact that marijuana stocks have been sort of a train wreck in 2019, with many of the most popular cannabis stocks plunging by a high double-digit percentage this year, we've still witnessed a lot of history being made.

For example, we saw Illinois become the first state to legalize the consumption and sale of adult-use marijuana entirely through the legislative process. Illinois' state-level legalization also included an expungement clause that could throw out prior marijuana convictions for close to 800,000 residents of the Land of Lincoln.

On a broader basis, we also saw the very first cannabis reform bills reach the congressional floor for vote. The Secure and Fair Enforcement (SAFE) Banking Act, which would protect financial institutions that provide basic banking services to pot businesses from federal prosecution in legalized states, was passed 321 to 103 in the House. The House Judiciary Committee also recently voted in favor of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act, which would remove marijuana from the controlled substances list.

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Another way we continued to see marijuana history made was via uplistings to major U.S. exchanges. By moving from the over-the-counter (OTC) exchange to either the New York Stock Exchange (NYSE) or Nasdaq, pot stocks have been able to improve their visibility, make themselves more accessible to Wall Street coverage and investment, and have demonstrated that cannabis is here to stay. This year alone, a number of popular cannabis names, including OrganiGram Holdings and HEXO, made the move from the OTC exchange to the big board.

The looming question often is: Which pot stock is next to make the move? It looks as if we now have that answer.

Say hello to MediPharm Labs, the next cannabis stock ready to move to the Nasdaq

In November, Canadian-focused extraction-services provider MediPharm Labs (OTC:MEDIF) announced that it had filed paperwork with the Nasdaq to (hopefully) uplist from the OTC exchange. In doing so, MediPharm believes it'll be giving investors more options to take part in the company's growth story, given a dual listing in the U.S. and Canada. 

While an uplisting is never a guarantee given the laundry list of financial and intangible factors that must be accounted for during the application process, MediPharm, the top-performing pot stock in 2019, checks off nearly every box along the way.

Arguably the most impressive aspect of MediPharm Labs is that despite only commencing extraction operations in November 2018, the company has generated two consecutive quarters of no-nonsense operating profits. This means the company's revenue has outpaced both cost of goods and recurring operating expenses, leading to a real operating profit, and not one that's been magnified by a bunch of one-time benefits or fair-value adjustments.

A gloved individual holding a full vial and dropper of cannabinoid-rich liquid in front of a hemp plant.

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What makes MediPharm's business "tick" is the fact that it sits at the center of the biggest development in the cannabis space yet: the push to derivative products. As an extraction company, MediPharm provides resins, distillates, concentrates, and/or targeted cannabinoids to its clients that'll be used in the creation of these high-margin derivatives (which are set to hit dispensary shelves in Canada any day now). Best of all, MediPharm's contracts to provide fee-based extraction services are typically for 18 months or longer, providing a degree of stability or cash flow predictability in an industry where virtually nothing is a given.

Currently working on expanding its capacity, MediPharm Labs anticipates eventually having the ability to process 500,000 kilos of hemp and cannabis biomass for the Canadian market per year.

The only check mark MediPharm doesn't receive is in the longevity department, considering that it began its processing operations a year ago. I'd like to think that MediPharm's ability to generate two consecutive quarters of operating profits demonstrates the longevity potential of its business model, but that's not guaranteed to be the case when regulators review the company's uplisting application.

After MediPharm, which pot stock is next to uplist?

Although there's no timeline as to when MediPharm expects to hear back on its application, I expect the company to get the nod to uplist to the Nasdaq -- at which point investors will again be left to debate which company could make the move next.

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Interestingly enough, the most logical choice to follow MediPharm to the Nasdaq is one of its biggest extraction-service rivals, Valens GroWorks (NASDAQ:VLNCF). Similar to MediPharm, Valens GroWorks was able to deliver a real operating profit in its most recent quarter, ended in August. Thus, even with a relatively new business model, it's also shown that it can be quite profitable.

Valens has landed what should be two very lucrative contracts. In April, the company signed HEXO to a two-year agreement totaling 80,000 kilos-in-aggregate of cannabis and hemp biomass. The deal will see Valens provide resins and distillates to HEXO that it'll be using in high-margin derivative products. Then, in June, Valens reworked an existing deal with Tilray, increasing the company's processing commitment to 60,000 kilos per year from 15,000 kilos per year.

With the goal of hitting 1 million kilos of annual processing capacity, Valens should have the ability to generate substantial operating profits for years to come. In my view, that makes it a likely candidate to follow MediPharm's footsteps to the Nasdaq in 2020.

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.