Most cannabis investors likely know of the big multi-state operators (MSOs), including Trulieve CannabisCresco Labs, and Green Thumb Industries. As some of the biggest names in the industry, they could be among the big winners if and when marijuana legalization finally takes place in the U.S. at the federal level. Many of these stocks have already generated significant returns, however, and for investors looking for the next big investment in the sector, it could be a good time to look at some lesser-known companies.

One stock in particular that investors should be careful not to overlook is Verano Holdings (VRNO.F 2.90%). The Chicago-based, vertically integrated marijuana producer sells premium cannabis products under multiple brand names. It is active in 14 states across the country and has 832,000 square feet of cultivation space, plus it operates more than 80 retail locations. Verano has quietly been generating some impressive results of late, and its top line is already creeping up close to that of some of the big MSOs. It's still relatively small by market cap, but it could become much bigger in the future. Here's why buying this pot stock today could be a great move. 

A couple working inside of a greenhouse.

Image source: Getty Images.

The company reported revenue of $199 million last quarter

On Aug. 10, Verano reported its second-quarter results for the period ending June 30, for which sales came in at just under the $200 million mark. It was a 34% improvement from the first quarter and on a year-over-year basis, revenue jumped by 164%.

That's impressive for a company that went public in February, not least because it wasn't far behind some of its more notable rivals -- Cresco Labs reported revenue of $210 million for the same period, Trulieve's top line was $215 million, and Green Thumb's sales were just under $222 million.

Verano Holdings isn't far behind the big players in the industry on this metric, and it gives investors some good bang for their buck; the stock is a bargain when looking at its forward price-to-sales (P/S) multiple:

TCNNF PS Ratio (Forward) Chart

TCNNF PS Ratio (Forward) data by YCharts

Verano also has a strong bottom line

What's even more impressive is that despite slightly lagging behind the aforementioned competitors on the top line, Verano posted a better adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profit than all but one of them -- Trulieve. With a profit of $81 million, Verano reported more in adjusted earnings than Green Thumb ($79 million) and Cresco Labs ($46 million). Trulieve's adjusted EBITDA of $95 million was the only one of the three that was higher than Verano's tally.

At 41% of revenue, that's an incredibly high rate of sales that's making it through to Verano's bottom line. Combined with not just positive operating cash flow of $29 million but also free cash of $4 million during the period, Verano is in a great position to grow its business without having to rely on frequent share offerings.

Much more growth is on the way

In Q2, through acquisitions and new location openings, Verano added 16 dispensaries, bringing its total to 83. The company has been expanding into relatively new recreational pot states such as New Jersey and Arizona, both of which have passed marijuana legislation within just the past year. (That said, in New Jersey, sales from the new segment won't commence until 2022.)

Verano plans to have 90 dispensaries open before the year is over, with management estimating that by then, it will be approaching a run rate of $1.1 billion in annual revenue. That's up from the roughly $800 million it is at right now.

Is Verano Holdings a buy?

Verano may not be as well known as the other pot stocks mentioned above, but that doesn't mean it is a small player; of the 14 states in which it has a presence, its operations are active in 11 of them. With annual revenue potentially topping more than $1 billion in 2022 and earning a 40% adjusted EBITDA margin on top of that, Verano could be an incredibly underrated buy right now. It has a footprint in some exciting markets, and the company is in a strong position to fund much of its own growth.

I wouldn't expect the stock to stay at its cheap valuation for long, especially as it continues to rival some of the biggest names in the industry. Verano is an underrated pot stock that all cannabis investors should have on their radar. It could be one of the best growth investments out there today.