Florida-based Trulieve Cannabis (TCNNF 7.33%) is a medicinal cannabis purveyor par excellence. With a slew of recent acquisitions behind it and another major purchase looming, the company is branching out geographically and testing new waters unlike ever before in its history. 

Given that its strategy is to replicate its prior successes in cornering state-level markets, it'll be running a familiar playbook on new turf. Will it succeed? In my view, it's probable. 

A cannabis farmer holds a tablet and smiles.

Image source: Getty Images.

Why it's worth buying Trulieve

The single biggest reason why investors should consider adding this stock to their portfolio is that it's growing at an absolutely bonkers pace. In the first three months of 2021, the company's quarterly revenue skyrocketed by more than double year over year. And its quarterly earnings expanded at a rapid clip of 27.4% compared to the same period in 2020. But wait, there's more: Trulieve is profitable, too. So there's no need to worry about it falling into the cannabis industry's all-too-common pitfall of pursuing unprofitable growth until the overhead becomes unsustainable. 

In fact, Trulieve's strength is its persistence and skill in developing its core markets without a mismatch between output capacity with demand. In its home state of Florida, where the vast majority of its dispensaries operate, the company holds 48% of the medicinal marijuana market. And while its market share outside the state is in its infancy at best, that's probably about to change in a big way.

Its upcoming acquisition of Harvest Health & Recreation (HRVSF) will bolster its total addressable market by as much as 53%, massively increasing its cultivation capacity and its collection of branded cannabis products. The deal, worth $2.1 billion in stock, will add to Trulieve's substantial retail holdings in the northeast while also giving it a presence in the southwest, where it aims to build a new hub. Management claims that the newly formed entity will be "the most profitable public multi-state operator," which makes it especially attractive to cannabis investors who are more conservative (yes, we exist). 

Harvest shareholders still need to vote to approve the deal, which they should do sometime in the third quarter. Assuming they assent, Trulieve will be even stronger going into 2022, and it's estimated that the combined entity could make as much as $1.23 billion in revenue by the end of this year. 

Expansion isn't without risks

As promising as Trulieve is, investors should keep their expectations in check, realizing its ambitions to grow could potentially leave it overextended or stuck in markets where it isn't a good fit. Currently, 83 of Trulieve's 91 dispensaries are located in Florida. Strength in its home market is a positive thing, but it's important to recognize that the company is largely unproven when it comes to profitable expansion into other states. 

If the Harvest acquisition proceeds as planned, Trulieve will suddenly have significant new holdings across the country, all of which will be in markets in which it has minimal experience. Consumers in its new markets may not have the same product preferences as Floridians. Likewise, there may be higher cultivation and distribution costs in the northeast. And Harvest itself isn't profitable, even in its home region. 

That doesn't mean the company's profitability or growth are guaranteed to suffer after the purchase, but it's a risk that investors need to be aware of nonetheless. 

Profitability and wild sales growth make for a winner

I think Trulieve will succeed in sustainably expanding its operations outside of Florida. Thanks to the upcoming Harvest acquisition, it'll have plenty of state markets to develop using the same successful strategies it did at home. And the company will be able to rely on the money generated by its operations in the Southeast to support its efforts to penetrate new regions.

If recreational cannabis legalization proceeds at a national level, or as a ballot question in Florida's 2022 election, the company won't need to do much differently to reap massive returns from its existing distribution network. But that would be a bonus -- Trulieve is a good stock to purchase today on account of its strength in Florida alone.