Investors have been used to paying big premiums to own marijuana stocks in the past. However, with pot stocks falling sharply over the past several months, valuations have come down sharply. The three stocks listed below have all declined by more than 50% since July 1. However, let's take a look to see if they've become good buys today or if there is still too much risk to invest in them.

1. OrganiGram

OrganiGram Holdings (NASDAQ:OGI) lost nearly 60% of its market cap in the past six months. The cannabis producer released its year-end results in November, which showed OrganiGram's net revenue was $80.4 million Canadian dollars for the 2019 fiscal year, more than six times the CA$12.4 million it posted in the prior year. Unfortunately, amid all the growth, the company still incurred a loss of CA$9.5 million in fiscal 2019, compared to a profit of CA$22.1 million a year ago.

However, things could improve for the company as OrganiGram expects to be a big player in the cannabis edibles market, especially when it comes to chocolate. On Dec. 13, the company announced Health Canada approved 16 additional rooms for cannabis cultivation. OrganiGram now has a licensed capacity of 89,000/kg per year out of its Moncton, New Brunswick headquarters. 

Trimming weeds.

Image Source: Getty Images.

Currently, OrganiGram is trading at around seven times its sales and a price-to-book (P/B) multiple of 1.7. It's a decent price for a cannabis stock that's valued at a modest market cap of $400 million, which could have a lot of potential in the edibles market. OrganiGram looks like one of the better buys in the industry today.

2. Aurora Cannabis

Aurora Cannabis (NYSE:ACB) is not an under-the-radar stock like OrganiGram, as its market cap of $2.8 billion makes it one of the top pot stocks in the world. Like Organigram, Aurora has seen its share price crater over the past six months, falling by 65%.

The company has struggled with profitability and meeting analyst forecasts, as it has recorded a loss in three of the past four quarters. Its net loss over the trailing twelve months totaled CA$383.5 million on sales of CA$293.5 million. Meeting expectations won't get any easier now that the company's sales in Germany have been halted after it failed to get a permit for what Chief Operating Officer Cam Battley said is "treatment that we use to maintain the product without microbial contamination." Investors learned of the temporary hold on sales in November, and the company expects that operations will go back to normal "very early in the new year." 

It's a setback that is only going to make things more challenging for Aurora for its current quarter. Currently, Aurora is trading at more than 12 times its sales and its P/B is at 0.80. Given that investors could be disappointed again when the company reports its Q2 results in February, even these relatively low multiples may make Aurora too expensive to buy today, as there could be further losses for the stock in the months to come.

3. Tilray

Tilray (NASDAQ:TLRY) has suffered the largest losses out of the stocks listed here, dropping more than 70% since the beginning of the year. Tilray has lost half of its value in just six months. The peak price of $300 that it reached last year is just a distant memory, as even trading above $20 is a challenge for the stock today.

The company has incurred a net loss in each of the past four quarters, and while the losses have been stable, there hasn't been a progression toward breakeven. Over the trailing twelve months, Tilray's net losses of $132 million have nearly been as large as its sales of $135.6 million. 

What's been disappointing about Tilray's recent results is just how little sales it generated from the adult-use market -- $15.8 million. Although its revenue is diverse, Tilray has generated more in hemp product sales over the past nine months than it has in revenue from the adult-use market. This may change in future quarters as the cannabis market in Canada continues to evolve and as more pot shops come online, but it's something that investors should keep a close eye on going forward.

The stock is currently trading at around 15 times its sales and 4.5 times book value, making it the most expensive stock to own among the three listed here. Like Aurora, it's still a bit of an expensive buy given the question marks surrounding the company's financials.

Valuations in the industry remain high

As noted above, pot stocks suffered significant losses in 2019, but that doesn't mean that they've become cheap buys. OrganiGram is the only stock of these three that may offer investors good value, and that still depends on its ability to do well in the edibles segment.

When investing in pot stocks, investors shouldn't neglect to look at how close a company is to breaking even and how much of a premium they're paying to own a piece of the company. Now that the hype surrounding the industry has worn off, valuation principles will play much more of a role in the industry's future, and that's why it's more important than ever to pay attention to sales and earnings multiples.