The Horizons Marijuana Life Sciences ETF has been red-hot over the past year, climbing more than 65% and dwarfing the S&P 500's gains of 43%. For cannabis investors, that means many stocks are trading at inflated valuations. But if you are worried about missing out on opportunities in the sector, there are still plenty of stocks flying under the radar that could be great buys.

Auxly (CBWTF 0.82%)IM Cannabis (IMCC -5.06%), and Clever Leaves (CLVR -1.92%) possess some exciting growth opportunities that could make them some of the best buys out there right now. While they likely won't make you rich overnight, if you are willing to remain patient, they have the potential to deliver some great returns for your portfolio. 

Cannabis plants.

Image source: Getty Images.

1. Auxly

Canadian cannabis producer Auxly has seen its share price rise just 12% in the past 12 months. But it is slowly building up its business and expanding into dried flower products. Up until now, Auxly has taken a bit of a backwards approach, focusing on the edibles and vapes segment of the market (also known as "cannabis 2.0 products"), which weren't legal until one year after Canada legalized marijuana in flower form. Most cannabis companies started with dried flower products and then moved into the new segment of the market. However, Auxly has been doing a great job there, announcing earlier this year that it led in market share in 2020 for 2.0 products in Canada.

Expanding into more conventional cannabis products will help to diversify the business while also continuing to grow its top line. The company last released its quarterly results on Nov. 30, showing that in the nine-month period ending Sept. 30, its revenue totaled CA$31.9 million. That represented growth of 514% year-over-year, though the company still incurred an adjusted EBITDA loss of CA$24.2 million.

On April 20, the company's stock moved onto Canada's main exchange, the TSX (it was previously on the smaller TSX Venture Exchange). Being on a major exchange could help Auxly's shares gain more traction. And if it also delivers strong sales numbers and its expansion into dried flower products proves to be successful, it may be one of the better-performing pot stocks from here on out. Today it trades at 7 times its revenue, which is a bargain compared with bigger names like Cronos and Canopy Growth, which are at price-to-sales (P/S) multiples of 61 and 25, respectively. 

2. IM Cannabis

For those interested in some international exposure, IM Cannabis is another small but intriguing cannabis investment. It also recently moved onto a larger exchange, the Nasdaq, on March 1 (previously it was only listed on the Canadian Securities Exchange). The Israeli-based company is strategically located near Europe. And Israel stands to be one of the next countries to legalize pot, with its justice minister stating in November that a law will permit authorized stores to sell cannabis in nine months.

Research company BDSA projects that the international cannabis market (outside of Canada and the U.S.) will be worth $6.5 billion in 2025 -- more than Canada's, which will be at just $6.1 billion by then. Specifically, the European market is expected to grow at a compounded annual growth rate (CAGR) of 42%, which is a much faster pace than both North American markets (Canada's average CAGR is projected to be 26% during the forecast period, while for the U.S. that number is 18%).

IM Cannabis is still a relatively small company, with sales over its most recent three quarters totaling just CA$11 million and net losses of CA$8.8 million. But the company could get a lot bigger. Last year it announced the acquisition of Trichome Financial, which has helped provide capital for the cannabis industry. Trichome's experience with acquisitions could help pave the way for some more M&A activity, as the combined company has a "common goal of continuing an aggressive, synergistic and accretive acquisition strategy in North America." With Trichome, IM Cannabis expects to achieve positive adjusted EBITDA this year.

With CA$13.5 million in revenue over the trailing 12 months, IM Cannabis is trading at a P/S multiple of more than 24. It isn't a bargain buy given what it has achieved thus far, but that could change given all the opportunities ahead, which is why this could be an underrated investment in the cannabis sector.

3. Clever Leaves

Another global company to add to your list is New York-based Clever Leaves. The business has investments and operations in Europe, North America, and South America, where it has a 1.8 million-square-foot greenhouse in Colombia. Clever Leaves estimates that it has a larger cultivation footprint than big names like Aurora Cannabis and Cresco Labs

It is banking on a lower cost of production in Colombia, where wages are lower and its production costs of less than $0.20 per gram will be far lower than those of the competition. The average in Canada is approximately $2.07 per gram, and in its most recent quarter for the period ending Feb. 28, low-cost producer Aphria reported all-in costs per gram of approximately $1.23.

Clever Leaves' year-end results, released March 30, showed sales of $12.1 million in 2020, representing growth of 55% year over year. While its gross margin of 61% was strong, the company's operating expenses of $35.9 million dragged on the bottom line, with Clever Leaves incurring a net loss of $36.7 million for the full year. However, the company's operating expenses declined by more than 9% from the previous year. If it can maintain its gross margins while also growing its sales, there could be a path to profitability in the near future. 

At a P/S multiple of nearly 22, this isn't a cheap buy right now. But if Clever Leaves can effectively scale its business, it could quickly take off in value, as its low production costs could make profitability a realistic goal for the business and attract many cannabis investors.