A change in strategy and branding sometimes helps make a business more successful and a better overall investment. That's what Vireo Health is banking on, at least. The company recently changed its name to Goodness Growth Holdings (GDNS.F -4.65%). In addition to a name change, the business has also announced plans to expand into psychedelics.

Below, I'll look at why Goodness Growth is trying to set course on a different path, whether these are good moves for the company, and whether you should consider investing in it.

A person looking at a cannabis plant outdoors.

Image source: Getty Images.

Why is the company making these changes?

Earlier this month, Goodness Growth announced that its subsidiary, Resurgent Biosciences, is going to research psychedelic medicine and develop intellectual property (IP) in that area. However, the company noted that Resurgent won't actually be manufacturing or cultivating any psychedelics. The company says this move is a "natural expansion" of the business and its scientific expertise.

It's also an opportunity for Goodness Growth to tap into a hot new market. Analysts from ResearchandMarkets project that the market for psychedelic drugs could be worth nearly $11 billion by 2027, growing at a compound annual growth rate of more than 12% until then.

The company didn't go into much detail as to why it changed its name, but it did want to make it clear its focus is now on growth. Another reason it may have wanted to go under a different name: To distance itself from bad press. Two former Vireo Health employees were involved with smuggling marijuana across state lines in 2016. And while the charges were eventually dropped and the company didn't face any punishment, it's still a negative association that a change in name can help it break free from.

Are these good moves for the business?

Both of these changes look to be positive ones for Goodness Growth. While the name change itself may not mean much for the company's financials, expanding into psychedelics could be a great opportunity over the long term.

The company has already demonstrated some impressive IP capabilities with the launch of its new packaging technology, TerpSafe. TerpSafe preserves 100% of the terpenes in flower products for at least six weeks. In its studies, Goodness Growth found that within four weeks, products would lose over 30% of their terpene content. Terpenes are what give cannabis strains their aromas and can make the products more pleasant to customers.

If the company can find similar success in developing IP for psychedelics, it could make Goodness Growth an exciting stock to own, giving investors the opportunity to tap into another high-growth market besides cannabis. 

The company is expecting significant growth in fiscal 2022

Goodness Growth is setting some big expectations for the next couple of years. Through the next fiscal year, it plans to start up 10 retail dispensaries and projects. It will begin selling recreational marijuana in New Mexico (first quarter of fiscal 2022), New York (next summer), and medical marijuana in Minnesota (next spring). For fiscal 2022, Goodness Growth projects that sales could top out at $180 million and that its adjusted EBITDA will fall within a range of $35 million to $55 million.

Those are some lofty targets given that when the company last released its results on May 14, sales for the first three months of fiscal 2021 totaled just $13.2 million. That would put it at an annual run rate of just under $53 million in sales. And while some big markets like New York will be opening up, it's definitely an ambitious strategy for management to project revenue to more than triple from where it is right now. In the past quarter, the business also reported an adjusted EBITDA loss of $1.8 million -- that too has a long way to go in reaching management's targets.

Should you invest in Goodness Growth?

Goodness Growth looks like a promising investment given the many different areas it can tap into for potential growth, whether it be within cannabis or psychedelics. And with more markets opening up in the marijuana industry, it isn't going to run out of opportunities to grow its business anytime soon.

However, I'm wary of businesses -- especially in this industry where investors have frequently been let down -- that make ultra-aggressive projections and forecasts. Not only does it set the bar high, but now investors will be pricing those expectations into the current share price.

And so unless Goodness Growth outperforms the already high hopes it has for its operations, it could be a challenge for the stock to build on the impressive returns it has already generated for investors. Over the past year, its shares are up 257% and are well above the returns of the Horizons Marijuana Life Sciences ETF, which is up by just 40%. Investors may be better off investing in these more established pot stocks instead.