After raising cash multiple times in February, popular cannabis company Sundial Growers (NASDAQ:SNDL) reported that its unrestricted cash totaled 610 million Canadian dollars. It then raised an additional CA$110 million-plus from a warrant exchange soon afterward. 

With this boatload of cash on its books, Sundial is in an excellent position to make a big acquisition (if it wants to). The company said in its latest earnings release (Nov. 11) that it would "review potential strategic alternatives to maximize value," leading many investors to speculate that a deal could soon be in the cards. Here's a look at some of the most attractive cannabis companies that it could buy (for cash) right now.

Cannabis greenhouse.

Image source: Getty Images.

1. Valens

Cannabis extraction company The Valens Company (OTC:VLNCF) has a market cap of roughly CA$250 million right now and could make for an attractive acquisition target for Sundial. Valens helps producers make a variety of products, including vapes and beverages. And Sundial has shown an interest in edibles, investing CA$22 million in Indiva last month. Indiva makes cannabis-infused chocolate, gummies, sugar, and salt products. 

Targeting Valens would instantly expand Sundial's potential, making the company not just a cannabis producer but also an extractor and testing services provider. Over the trailing 12 months, Valens has generated CA$84 million in revenue, which is even more than the CA$74 million that Sundial has reported over its past four quarters. 

2. Auxly

Another opportunity for Sundial to get deeper into edibles is Auxly Cannabis Group (OTC:CBWTF). In January, the company announced that it was the top-selling producer in the Canadian "cannabis 2.0" market (which includes vapes, edibles, concentrates, and other products) last year, even though it didn't sell products in every category. Whether Auxly can maintain that position is debatable, however, as 2020 was only the first full year the cannabis 2.0 market was legal in Canada.

At a market cap of CA$260 million, Auxly is right around the same price as Valens. However, with CA$35 million in the trailing 12 months, its sales are much more modest. The company has 110 product SKUs and four consumer brands. From oils to chocolate to vapes, it can instantly expand Sundial's offerings and help it reach more cannabis customers.

3. IM Cannabis

A third option for Sundial is IM Cannabis (NASDAQ:IMCC). This Israeli-based company is worth more than CA$410 million and is the most expensive option on this list. But one of the reasons it makes for an intriguing buy is that it would help Sundial build a presence overseas, especially since marijuana remains illegal federally in the U.S., which prevents the Canadian company from expanding there. IM Cannabis plans to export to key European markets (it already has a distribution network in Germany set up), as well as North America.

The business is still in its early stages, reporting just CA$11 million in revenue over the nine-month period ending Sept. 30. But with gross margins in excess of 50%, IM is making decent money off its products and could potentially become profitable as it scales up production.

Is a deal inevitable for Sundial?

The above companies are just three examples of how Sundial can expand and transform its business. Today, its stock may not be all that attractive a buy -- Sundial's net sales of CA$12.9 million in its most recent period, for the quarter ending Sept. 30, were down 54% from the previous year. However, an acquisition could quickly change the outlook for the business. 

Whether it wants to offer new services (Valens), sell more products (Auxly), or penetrate new markets (IM Cannabis), there are plenty of options out there for Sundial -- including those that go far beyond this list. With tons of cash at its disposal, the company can also afford to wait and swoop in should prices come down -- one potential reason to avoid a deal right now is that valuations are high. Sundial is no exception; its shares have soared more than 140% year to date. The Horizons Marijuana Life Sciences ETF has climbed by 50% over the same time.

It is possible that Sundial management may not be enamored with anything out there right now, and simply waiting may be the best move for the company. Its modest investment in Indiva suggests that management is being careful and strategic about where it puts its money, and that's a great sign for investors. 

Should you buy Sundial stock?

Sundial has risen sharply in value over just the past few months, and that might mute your returns if you were to invest in the company right now. My biggest concern is how volatile the stock has been of late.

SNDL Chart

SNDL data by YCharts

From less than $0.50 to start the year to highs of more than $3, there has been a lot of movement in Sundial's price within a fairly short time frame. Although there is lots of potential here given that Sundial is sitting on lots of cash and looking for deals, this is a risky investment. Unless you like roller coaster rides, this may not be the best pot stock to buy right now.

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.