It's been a dismal, horrible, rotten, no-good 12-month stretch for OrganiGram Holdings (NASDAQ:OGI) and Canopy Growth (NYSE:CGC). Both Canadian cannabis stocks have lost close to two-thirds of their value during the period.

The coronavirus-fueled market sell-off has weighed heavily on the share prices of both OrganiGram and Canopy. However, the declines started last year as the Canadian recreational cannabis market was constrained by the lack of retail stores.

But the future could be brighter for OrganiGram and Canopy Growth. Which is the better stock to buy for long-term investors?

Hands holding two cannabis leaves with a blue sky in the background

Image source: Getty Images.

The case for OrganiGram

OrganiGram ranks as one of the best-run Canadian cannabis producers. Unlike several of the biggest Canadian operators, OrganiGram hasn't had upheaval in its executive ranks over the last year. The company has exercised greater fiscal discipline than most of its bigger peers as well.

All of this shows up in OrganiGram's financial results. The company is generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) while most Canadian cannabis operators are still only hoping to reach that milestone. It helps that OrganiGram claims one of the lowest cost structures in the industry.

OrganiGram is in a great position to capitalize on the Cannabis 2.0 opportunity, Canada's new market for cannabis derivatives products. The company is focusing primarily on launching vape pens and edibles, the two most popular types of cannabis derivative products in the U.S. It has also developed a dissolvable cannabis-infused powder that can be mixed with liquids to create a cannabis beverage. OrganiGram expects to launch this new product in the second quarter of 2020.

There's also an interesting twist for OrganiGram. The company's investment in Hyasynth makes it a leader in the development of cannabinoids using biosynthesis, which uses genetic engineering of yeast to produce high-quality cannabinoids including CBD and THC. This approach could drastically lower the costs associated with extracting cannabinoids from cannabis plants.

While there aren't many marijuana stocks that you could call cheap with a straight face, OrganiGram's valuation is more attractive than most. Its market cap stands at close to $325 million. Its shares trade at only 4.7 times trailing-12-month sales. 

The case for Canopy Growth

Canopy Growth is one of those rivals of OrganiGram that has seen turnover at the top. But the company's new CEO, David Klein, already appears to be bringing a new fiscal conservatism to Canopy. Klein previously served as CFO of Constellation Brands, Canopy Growth's partner and largest shareholder.

One main argument for buying Canopy Growth shares is that the company is the undisputed leader in the Canadian cannabis industry. Canopy claims the No. 1 market share in Canada's adult-use recreational marijuana market. It's also a top player in the country's medical cannabis market.

Canopy isn't just focused on Canada, though. The company is one of a handful of Canadian cannabis producers that compete in the fast-growing German medical cannabis market. Canopy also has operations in several other key cannabis markets, including Australia and Latin America.

No Canadian cannabis company has positioned itself in the U.S. as Canopy Growth has. Canopy was the first to establish hemp CBD operations in the U.S. and recently launched its first hemp CBD products in its southern neighbor. The company also made a deal to acquire U.S.-based cannabis operator Acreage Holdings pending changes to U.S. laws that would make cannabis legal at the federal level. 

Thanks to significant investments from Constellation Brands, Canopy's cash, cash equivalents, and short-term investments totaled 2.28 billion in Canadian dollars at the end of 2019. With the impact of the coronavirus pandemic likely to continue for a few more months, having enough cash to fund operations for a while is critical for cannabis companies. Canopy Growth should be in a better position than most to survive the current crisis and thrive after life returns to normal.

Better buy

I think that OrganiGram is the better pick between these two pot stocks. OrganiGram's valuation and the competence of its management team make it the best stock to buy among the leading Canadian cannabis producers, in my opinion.

However, OrganiGram shares are likely to remain highly volatile for a while. I also suspect that the company could issue new shares over the next 12 months to raise additional capital, a move that would dilute the value of existing shares. Investors focused on the short-term should probably stay away from the stock, but aggressive investors with a long-term perspective should be able to realize nice gains over the next few years buying OrganiGram at its current share price.