Could Dogecoin (DOGE 14.28%) make the comeback of all comebacks? Maybe, but I wouldn't necessarily bank on it. Even if the popular cryptocurrency's rebound picks up additional momentum, any gains could evaporate quickly.
You could buy Dogecoin in the hope that the whims of traders will keep pushing its price higher. Another option, though, is to invest in the stocks of companies in an industry that's still only in its early stages with massive growth potential. I'm referring to the cannabis industry and, in particular, the U.S. cannabis industry. Here are three cannabis stocks that I think are much better buys than Dogecoin.
Ayr Wellness (AYRW.F -1.34%) ranks as one of the fastest-growing multistate cannabis operators in the U.S. The company reported 74% year-over-year revenue growth in the first quarter of 2021. Unlike many cannabis operators (especially those in Canada), Ayr is already generating strong positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
One key reason for Ayr's tremendous growth is its aggressive acquisition strategy. In February, the company completed the acquisition of Liberty Health Sciences, giving it a major presence in Florida's medical cannabis market. Near the end of Q1, Ayr completed acquisitions in Arizona and Ohio. It expects to close on another transaction in New Jersey this summer, which will enable the company to expand into its seventh state.
This wheeling and dealing should turbocharge Ayr's growth. The company projects sales to jump 54% quarter over quarter in Q2 to $90 million. It looks for 2022 revenue of at least $725 million.
Ayr provides a clear path to delivering solid returns, something Dogecoin can't do. It's also relatively cheap compared to its peers, with a price-to-sales (P/S) ratio below 5.5.
Cresco Labs (CRLBF -0.56%) stands out as another multistate cannabis operator that's grown tremendously through acquisitions. The company's buyout of Origin House last year vaulted it instantly into a leading position in California.
More recently, Cresco acquired Bluma Wellness in April. This purchase gave the company eight medical cannabis dispensaries in Florida, seven dispensaries under construction or in permitting, plus one of the state's only cultivation facilities for ultra-premium cannabis flower.
Cresco currently has operations in 10 states. These include seven of the 10 most heavily populated states in the U.S. The company should especially have strong growth prospects in New York, which recently legalized recreational marijuana.
Cresco should reach an annualized revenue run rate topping $1 billion by the end of this year. And its P/S multiple of only 5.4 is one of the lowest among U.S. cannabis companies.
Innovative Industrial Properties
Innovative Industrial Properties (IIPR 2.30%) provides something to investors that Dogecoin and few other cannabis stocks can offer -- a dividend every quarter. As a real estate investment trust (REIT), the company must distribute at least 90% of its taxable income to shareholders in the form of dividends.
IIP isn't an ordinary REIT, though. It focuses on the medical cannabis industry. The company's business model is to buy properties from medical cannabis operators, then lease them back to the operators. These sale-leaseback transactions generate strong recurring revenue for IIP.
That revenue is growing quickly, more than doubling year over year in Q1. All IIP needs to do to keep its momentum going is to make more sale-leaseback deals. With its recent issuance of $300 million in senior notes, the company has plenty of cash to scoop up more properties.
Any investment, whether it's Dogecoin or a solid company like IIP, comes with some risks. For IIP, the main risk is that competition could increase if federal cannabis reform clears the way for cannabis operators to access traditional banking services. However, the overall growth of the U.S. cannabis market should enable IIP to continue delivering solid returns for investors over the next several years.