While most major pot producers have seen their share prices tumble over the past few months, one company in particular has bucked this trend, gaining over 40% in the past four weeks alone. If you still don't know which company this is, it's Aphria (NYSE:APHA).

Although this Canadian pot producer might have started the year off on a sour note, the company has since proven itself as one of the better large-cap cannabis stocks on the market, mainly due to its profitability. Now that the company has recovered much of its market value while other major pot stocks have been plummeting, does this mean Aphria is a buy?

An image of a cannabis plant overlayed with an arrow that rises and falls but ultimately heads higher

Image source: Getty Images.

What's driving this surge?

In terms of news, there isn't much going on at the moment that would justify this price increase. The last major announcement from the company was on Dec. 2, when Aphria secured an 80 million Canadian dollar credit facility to help expand its Aphria Diamond cultivation facility at a fairly reasonable interest rate in the low to high 5% range. Overall, it's a pretty good deal considering other cannabis companies are fighting to secure funding to shore up their losses, leading to more competition for financing that pushes rates higher. Green Organic Dutchman, for example, recently secured a credit facility at a 13% annual interest rate, so Aphria's deal seems pretty impressive in comparison.

At the same time, provinces such as Ontario are opening up more dispensaries in the face of ongoing supply shortages, something that would help all major pot producers, including Aphria. Cannabis derivative products are also expected to be a new revenue source for many pot stocks now that these products have officially hit retail shelves across the country. However, these are reasons that should help the entire industry and don't explain Aphria's recent surge specifically.

With no external reasons to point to, maybe the best explanation for Aphria's recent performance comes down to a shift in investor sentiments. There are a number of reasons Aphria stands out from its other cannabis competitors in the market right now, and investors could be realizing that this company is more desirable than they initially believed.

Profitability at a cheap price

Perhaps the biggest reason for the stock's stellar performance is that Aphria is the only large-cap cannabis company reporting a profit. For its most recent quarter, Aphria reported a profit of CA$16.4 million on total sales of CA$126.1 million. In terms of both gross revenue figures as well as profit, this edges out other, much larger companies such as Aurora Cannabis and Canopy Growth, which posted revenues of CA$75.2 million and CA$76.6 million, respectively, and net losses of CA$39.7 million and CA$374.6 million, respectively.

A big portion of Aphria's recent financial success comes from its German medical cannabis subsidiary, CC Pharma. After buying the company in 2018, CC Pharma has ended up becoming one of Aphria's main revenue drivers, amounting for almost three-quarters of all sales in its most recent quarter.

Aphria's stock is also quite cheap compared to other pot stocks, even after this 40% increase in share price. Currently, it trades at a 7.0 price-to-sales (P/S) ratio, well below others in the industry. Aurora and Canopy trade at 11.3 and 26.9 P/S ratios, respectively, while other companies like Tilray and Cronos Group trade at 12.6 and 79 times sales.

What's in store for Aphria?

Estimates for Aphria look pretty optimistic, with much of its future growth coming from its German CC Pharma business. The company is projecting fiscal 2020 revenue between CA$650 million and CA$700 million, with around half of that stemming from CC Pharma.

While aggressive growth figures are to be expected from the cannabis industry, they don't mean much by themselves. Investors have already seen overly optimistic targets from certain companies -- such as HEXO -- that were completely out of touch with reality. In that particular case, HEXO said it expected fiscal 2020 revenue to hit CA$400 million, then withdrew this target in October when it became abundantly clear it wasn't going to happen.

As such, pot investors should remain hesitant about any cannabis company's future expectations, especially if they sound too good to be true. But even if Aphria's 2020 results fall short of the CA$650 million it projects, as long as the company remains profitable, investors shouldn't be overly alarmed.

Should you buy?

In November, I wrote that Aphria might be the best large-cap pot stock on the market. Even after this 40% price increase over the past few weeks, the case for that argument remains pretty strong.

That's not to say Aphria won't face any issues in the near future. Further retail issues in the Canadian cannabis sector would definitely hurt the company, but the same could be said for almost every cannabis company operating across the northern border.

The fact that Aphria is profitable, cheaply valued, and owns an outperforming subsidiary in the heart of the European market are all major selling points for the stock. If you're comfortable investing in cannabis stocks at this time, there's a strong case to be made that Aphria still has plenty of upside potential.