The cannabis industry is constantly changing and expanding as more parts of the world legalize marijuana use. One thing that looks to be a safe bet right now, however, is that the top company in the industry will likely have to be a dominant force in the U.S. market -- which will be worth more than $34 billion by 2025 (more than any other region of the world), according to analysts from cannabis research company BDSA.

Multi-state operators (MSOs) in the U.S. have been battling for market share, with marijuana producers Curaleaf Holdings (CURLF 0.79%) and Trulieve Cannabis (TCNNF 1.01%) among the top two companies in revenue. And with a recent acquisition, Trulieve looks to have usurped the top spot in the industry from its key rival.

Two people talking and working inside of a greenhouse.

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Trulieve closes its acquisition of Harvest Health

On Oct. 1, Trulieve announced the closing of its acquisition of MSO Harvest Health & Recreation, which has a dominant presence in Arizona, where the sale of recreational marijuana began this year. With the deal closed, the company proudly proclaimed itself the "largest and most profitable U.S. cannabis operator."

The deal instantly expands Trulieve's presence in multiple markets. Until recently, the company's operations were mainly limited to its home state of Florida, whereas of Aug. 12, it had 85 of its 91 dispensaries. Trulieve has expanded into other states and has commenced operations in Massachusetts this year. One of the big drawbacks for the company has been its fairly limited reach outside of Florida.

Harvest Health, meanwhile, has more than 10 dispensaries in Pennsylvania, Florida, and Arizona. In total, the combined entity now has 149 dispensaries spanning 11 states.

The business is on track to generate more than $1.2 billion annually

In Trulieve's most recent quarterly results (for the period ending June 30), it reported revenue of $215.1 million. Harvest Health, meanwhile, generated $102.5 million. Together, that puts them at more than $317 million with an annual run rate of more than $1.2 billion. Rival Curaleaf isn't far behind, posting $312 million in quarterly revenue for the same period. 

And while the businesses now look to be neck and neck in terms of revenue, what sets the Trulieve-Harvest Health combination apart is its superior bottom line. The two marijuana producers combined for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $122.9 million in their most recent quarters versus just $84.4 million for Curaleaf. That translates into an adjusted EBITDA margin of 39% for Trulieve and 27% for Curaleaf.

Has Trulieve become a better buy?

Being the biggest company doesn't mean that Trulieve is necessarily the best buy in the sector; there are other promising cannabis stocks that could double in value within a few years. But if you want to minimize your risk in the sector while also investing in a top MSO, then it's hard to go wrong with Trulieve. It is instantly a larger, more diverse business today than it was before this acquisition.

And by adding a company into the mix that's already profitable on an adjusted EBITDA basis, investors don't need to worry about it dragging down Trulieve's numbers. If anything, the bottom line could continue to get stronger as a result of this merger.

Shares of Trulieve have fallen 6% year to date (the Horizons Marijuana Life Sciences ETF is down 3%) as excitement around pot stocks has waned given a lack of progress on any reform in the sector (optimism was high earlier in the year that federal legalization could be around the corner, but that hasn't panned out thus far). However, if you're willing to be patient and wait for that to happen, buying now while Trulieve's stock has been struggling could pave the way for some excellent returns over the long run.