Aphria (APHA) was easily the best-performing Canadian marijuana stock among the top five licensed producers last year. Nonetheless, the company's stock was still a big loser in absolute terms, with its shares falling by over 8% over the course of 2019. That fact speaks volumes about just how poorly the other big names in the industry. like Aurora Cannabis (ACB -7.79%), Canopy Growth (CGC -3.79%), Cronos Group (CRON), and Tilray, performed in 2019. In fact, it was arguably the steady stream of underwhelming earnings reports from these other big marijuana players that caused Aphria's shares to drastically underperform the broader markets last year. Aphria, after all, actually posted two consecutive profitable quarters in calendar year 2019 -- a feat no other top Canadian cultivator accomplished. 

Should investors take advantage of Aphria's year-long weakness right now, or is it best to watch this top marijuana stock from the safety of the sidelines in 2020? Let's take a deeper look at Aphria's potential risks and rewards to find out. 

A marijuana vape pen and two tins of buds sitting on a wooden table top.

Image source: Getty Images.

Aphria: Risk and rewards

Aphria has four clear-cut advantages over most licensed marijuana producers in Canada right now. Namely, its top-tier production capacity, sizable international footprint, strong brand building during the early stages of legalization, and extensive cash runway. On the production side, the company's Aphria One greenhouse, wholly owned British Columbia-based subsidiary Broken Coast, and 51% majority stake in Aphria Diamond give it an annual production of 255,000 kilograms of cannabis. That's good for third on the list of licensed Canadian producers as things stand now, behind only Aurora and Canopy. What's more, Aphria may even overtake Aurora in terms of annual production capacity this year, due to the latter company's decision to idle some key grow facilities and sell its Exeter farm in a cash-raising move.  

Turning to its global reach, Aphria sports international operations and strategic relations in a diverse set of countries including Australia, Argentina, Colombia, Denmark, Germany, Italy, Jamaica, Lesotho, Malta, and Paraguay. Why does this matter? Aphria's hub in Germany known as CC Pharma GmbH turned out to be the main reason the company handily beat Wall Street's revenue forecast in two consecutive quarters in 2019. So while it's true that the cannabis industry outside of Canada has been evolving at a snail's pace of late, there are a handful of bright spots popping up around the globe -- and Aphria has clearly taken advantage of these rare opportunities, as evinced by CC Pharma's breakout success in 2019.

Brand building is also morphing into a positive for Aphria and its shareholders. Thanks to its a key acquisition in 2018, Aphria now owns one of the most sought after premium cannabis brands in the industry, namely Vancouver Island's Broken Coast. The true impact of this deal probably won't be fully understood by the broader market for a few years, but the company's early brand-building efforts should prove to be a major stepping stone toward the formation of a formidable competitive moat later down the line. 

Lastly, Aphria has a surprisingly long cash runway relative to its chief competitors like Aurora and Canopy. On the heels of a $76 million equity investment from an unnamed institutional investor last week, Aphria's cash runway currently stands at almost two and a half years. Among Canada's big five licensed producers, Cronos Group is the only company with a longer cash runway than Aphria.    

What are the risks with this pot stock? Like all Canadian cultivators, Aphria is subject to the extensive red tape which has greatly slowed the maturation of the country's legal marijuana industry. Making matters worse, some provinces have decided to restrict the sale of certain high-margin derivative products like vapes -- or place eye-popping taxes on them -- over health concerns. Aphria, in turn, may take years to realize its true potential as a growth vehicle.  

Time to buy?

If you're the patient type and comfortable owning volatile equities, Aphria may be worth adding to your portfolio right now. The company has the financial firepower to outlast most of its chief competitors, a top notch premium brand via Broken Coast, and one of the most expansive international operations in the industry. That being said, Aphria's stock could very well lose ground yet again in 2020, because of the broader headwinds weighing on the industry as a whole. So it's probably not a good idea to buy a big chunk of stock all at once, but instead, to buy small allotments over a longer period of time. In that way, investors can minimize their risk stemming from wild price swings in Aphria's stock in 2020 and beyond.