From losers to leaders. That's the story for both Sundial Growers (SNDL -1.45%) and Tilray (TLRY). Last year, both of these stocks performed dismally. Sundial's shares plunged 84%, while Tilray stock tanked 52%. It's been a huge turnaround in 2021 so far, though. Both stocks have more than quadrupled year to date.

Which of these cannabis stocks is the better pick now? Here's how Sundial and Tilray stack up against each other.

Oversized cannabis leaf in a shopping cart

Image source: Getty Images.

Common denominators

Sundial and Tilray share several things in common. For one thing, the huge gains for both of their stocks this year have been fueled in part by short squeezes.

The obvious common denominator is that they're both Canadian cannabis producers. As a result, the two companies have similar opportunities. Each could deliver growth as the cannabis derivatives market in Canada expands.

Sundial and Tilray also have executive teams with deep experience in consumer packaged goods. Sundial's top officers previously worked with Conagra Brands, General Mills, Kellogg, Mars, and Molson Coors Brewing. Tilray's executives come from major CPG companies including Diageo, Molson Coors, and Revlon

The two cannabis companies also face similar challenges. Sundial's net cannabis revenue fell 36% sequentially in the third quarter of 2020. Tilray's third-quarter cannabis revenue declined 11% year over year (although it rebounded nicely in the following quarter).

Each of these companies is also unprofitable. Sundial posted a third-quarter net loss of 71.4 million in Canadian dollars ($56.2 million). Tilray had a net loss of $2.3 million in its third quarter and a loss of $3 million in the fourth.

Big differences

However, the differences between Sundial Growers and Tilray are striking. Tilray's market cap of around $5.5 billion is significantly larger than Sundial's market cap of close to $3 billion. This gap isn't surprising, considering that Tilray generated roughly five times more revenue than Sundial did in the third quarter. 

Tilray also has a broader product focus than Sundial does. While Sundial concentrates primarily on inhalable cannabis products, Tilray's cannabis products include a lineup of edibles, such as chocolates and gummies.

Sundial only sells in the Canadian market. Tilray, on the other hand, operates a facility in Portugal that gives it a launching pad for shipping its products to medical cannabis markets in Europe and Israel. In addition, the company's 2019 acquisition of Manitoba Harvest gave Tilray a significant hemp foods business in the U.S. 

The biggest differentiator of all between Tilray and Sundial, though, has to be Tilray's pending merger with Aphria (APHA). This deal will result in the creation of the largest cannabis company in the world based on revenue. The combined company will have a market share of around 17% in Canada.  

Better cannabis stock?

My view is that the choice between these two cannabis stocks is easy: Tilray is the better pick. 

The merger with Aphria will put Tilray in a much better position to compete globally. Aphria is already profitable and has operations that complement Tilray's businesses. The "new" Tilray will likely outperform Sundial Growers on nearly every front.

But while I believe that Tilray is the better cannabis stock compared to Sundial, I'm not recommending Tilray as a stock to buy right now. Why? I think there are pot stocks with more-compelling growth prospects -- especially in the U.S. market. The better cannabis stock in this case isn't the best cannabis stock.