November has been a big month for the cannabis industry. Voters in four states -- South Dakota, Montana, New Jersey, and Arizona -- elected to legalize marijuana and brought the total count of states where recreational use of pot states is legal to 15 plus D.C. On the same day, South Dakota and Mississippi passed ballot initiatives for medical marijuana, so there are now 36 states where patients can use cannabis for medical purposes.

The industry is getting bigger. And that means multistate operators will have more markets to penetrate and new opportunities to grow their sales. One cannabis stock that I'll look at today is Trulieve Cannabis (OTC:TCNNF). Is the Florida-based medical marijuana producer a good buy as it continues to expand its presence into more states across the country?

Marijuana plant in the sunset.

Image source: Getty Images.

11 straight quarters of growth and profits

On Nov. 17, Trulieve released its quarterly results for the period ending Sept. 30. It reported profitability, having grown its sales for the 11th period in a row. Revenue of $136.3 million was up 12.8% from the second quarter and 92.7% higher from the prior-year period. Adjusted earnings before income, taxes, depreciation, and amortization (EBITDA) totaled $67.5 million, which climbed 11.6% from the previous period and was an 82.9% improvement year over year.

This should excite investors. Trulieve has been achieving these results without much expansion outside of its home state of Florida. The company announced on the same day it released earnings that it was opening its 72nd dispensary in the country and 67th in the Sunshine State.

But the company is positioned for much more growth, announcing in its earnings release that it obtained a processor permit from West Virginia, which would expand its presence to a sixth state. In September, Trulieve acquired two Pennsylvania-based dispensaries, PurePenn and Solevo. Neither medical market is as promising as Florida, however, where annual sales could reach $1.2 billion in 2021. By comparison, analysts project that the medical marijuana market in Pennsylvania will be worth up to $700 million next year. West Virginia's medical marijuana program isn't even up and running yet, and may not see any sales until next spring.

On a pro forma basis, if Trulieve included its Pennsylvania acquisitions in its current results, its sales for Q3 would've totaled $154.9 million -- 13.6% higher than what it reported this past quarter. The transactions for PurePenn and Solevo closed on Nov. 12, so Trulieve will get a boost next quarter when it releases its year-end numbers, which will include the results from newly acquired dispensaries. Through other acquisitions, Trulieve also has operations in Connecticut, Massachusetts, and California.

With strong sales numbers and a solid bottom line, Trulieve is proving to be the closest thing to a surefire pot stock. It's no surprise its shares are up 119% this year, outperforming the S&P 500's 10% returns and dwarfing the Horizons Marijuana Life Sciences ETF, which is down 11% thus far in 2020. However, with Trulieve stock climbing so quickly in value, investors may be concerned that it's become too expensive to justify a purchase.

How does Trulieve compare to its peers?

A good way to compare marijuana stocks is by looking at their price-to-sales (P/S) ratios, since many of them aren't profitable right now. Here's how Trulieve stacks up against some of the other big multistate operators in the country:

TCNNF PS Ratio Chart

TCNNF PS Ratio data by YCharts

Compared to other rivals in the industry, Trulieve remains a cheaper buy. One of the reasons investors are willing to pay a much larger premium for Curaleaf is that it's a bigger company, operating in 23 states. In its Q3 results (also released on Nov. 17) for the same period as Trulieve, the Massachusetts-based cannabis operator reported $182.4 million in revenue but an adjusted EBITDA figure of $42.3 million, which was smaller than Trulieve's.

The gap between Curaleaf and Trulieve doesn't appear to be significant -- certainly not in terms of sales or profitability. And as both companies continue to acquire more locations, they'll continue competing as the top U.S. cannabis producers and distributers.

What does this mean for investors?

As Trulieve enters more markets and deploys its retail strategy, which has worked wonderfully in Florida, investors will continue to see sales hit new record highs. However, the company has been slower to expand than other multistate operators, and that could put it at a disadvantage as it enters states that its rivals may already have strong footings in. Curaleaf, for instance, has been aggressively expanding its Select brand that is now offered in 16 states, including Pennsylvania and New York.

Although Trulieve isn't active in as many states as Curaleaf, its focus on the Florida market has allowed it to slowly build up its presence and generate strong financials without overextending itself into other parts of the country. That's particularly important as expansion is costly and often requires acquisitions since a company can't simply send its products across states lines, because marijuana is still an illegal Schedule I drug. By taking a slower, more measured approach to its growth strategy, Trulieve can better position itself for success by conserving cash and deploying strategies that make the most sense for its business rather than expanding too quickly and in too many places.

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.