Ayr Wellness (AYRW.F 2.00%) has been rapidly expanding over the past year. It is active in more states, its business is generating some incredible numbers, and the company is profitable. You don't often get all three of those elements in a pot stock, especially one that is trading at a modest $1 billion valuation. 

Ayr is an intriguing pot stock that has a lot of potential -- if it can keep these positive results going. But has the stock soared too quickly to still be a good buy right now? Let's consider its recent performance, valuation, and whether you should consider investing in the stock.

Marijuana plant in the sunset.

Image source: Getty Images.

The company is coming off a strong year and expecting even more growth ahead

On March 10, Ayr reported its fourth-quarter and year-end results for the period ending Dec. 31, 2020. Sales of $47.8 million in Q4 grew 48% year over year, and full-year revenue of $155.1 million was 25% above what the company reported in 2019. Unlike many marijuana companies, Ayr also posted a positive adjusted EBITDA of $56.2 million for the entire year. A big part of the growth was due to Ayr expanding its presence from just two states to seven.

Although the company has no outlook for 2021, in what it says will be a "transitional year" for the business, it expects big things in 2022. Ayr projects that sales will come in at $725 million and its adjusted EBITDA will total $325 million. Its outlook makes a number of assumptions, including that its cultivation and manufacturing capacity in Arizona will be operational by the end of 2021 and that adult-use sales in New Jersey will start in the first quarter of 2022. The company is also planning to expand its presence in Pennsylvania, Massachusetts, and Florida. 

And with $236 million in cash on its books, Ayr may take on more acquisitions that could propel its growth even further.

Ayr's popularity has been taking off

In the past year, shares of the multistate operator have soared more than 470%, outperforming the Horizons Marijuana Life Sciences ETF and its 47% gains by a wide margin. The stock is also becoming more popular with individual investors; its trading activity has averaged much higher levels in recent months.

AYRWF 30-Day Average Daily Volume Chart

AYRWF 30-Day Average Daily Volume data by YCharts

Trading volumes are important to factor in because if more investors are buying and selling shares of the company, the stock will be more receptive to industry-related news and more likely to get a bump up if there is progress on marijuana legislation. However, it can also make it a riskier buy, especially given its rapid ascension over the past year.

Is Ayr's stock too expensive?

Currently, shares of Ayr trade at 5.3 times the company's sales over the past 12 months, which is right in line with the multiple of revenue that investors are paying for the average pot stock in the Horizons Marijuana Life Sciences ETF. Here is how it compares to Jushi and Harvest Health, two multistate operators with similar footprints.

AYRWF PS Ratio Chart

AYRWF PS Ratio data by YCharts

Ayr is trading at a very reasonable multiple for the industry, and it's a downright bargain compared to Jushi.

Should you buy shares of Ayr today?

What I like about Ayr is that with a $1 billion valuation, it isn't a terribly large pot stock right now. And that can change if it meets its extremely promising forecast for 2022. However, reading between the lines, the lack of forecast for 2021 suggests to me the company is expecting a challenging road ahead until next year. And given how hot the markets are right now, I wouldn't be surprised if Ayr's stock stumbles over the next few months, especially if its sales growth starts to decline or expenses chip away at its bottom line. 

Although Ayr looks to be a promising pot stock, for the reasons noted above, I would hold off on buying it now, as it could become a much cheaper buy later this year.