Curaleaf Holdings (CURLF 0.79%) is known for a being a top growth stock in the cannabis sector. It has generated more than $1 billion in revenue over the past 12 months, and it has been aggressively expanding into states across the country, with a presence in 23 of them.

But when the multi-state operator last reported earnings, its quarter-over-quarter growth rate stood at just 2%. Should investors be worried, or is this just a temporary bump in the road for this industry giant?

A farmer examining a cannabis plant.

Image source: Getty Images.

Growth was slower from the previous period

Year-over-year sales growth can sometimes easily look impressive in the cannabis sector because new markets open and acquisitions in the fast-growing industry can pad a business' top line. That's why quarter-over-quarter sales growth can sometimes be more valuable to cannabis investors to identify near-term trends or problems. Curaleaf's most recent quarterly results seemed to suggest investors should worry about the latter.

For the third-quarter ending Sept. 30, Curaleaf reported revenue of $317 million -- up just 2% from the $312 million it reported in the second quarter. During Q2, sales were up 20% from the first quarter. And in both quarters, the company launched new dispensaries (five in Q2 and two in Q3). Executive Chairman Boris Jordan did indicate that the company's top line was tracking toward the lower end of the $1.2 billion to $1.3 billion guidance for the year that Curaleaf previously issued.

Should investors be worried?

Given the state of the economy, a lackluster quarter for Curaleaf may not be all that concerning. In the third quarter, the U.S. economy's growth was just 2% -- the slowest since last year's crash during the early stages of the pandemic when gross domestic product fell by more than 31%. Supply chain issues and a decline in consumer spending weighed down the economy this past quarter.

Rival cannabis producer Trulieve Cannabis reported its latest quarterly results on Monday, and the story rang true for it as well: Quarterly net sales for the period ending Sept. 30 of $224.1 million rose by a modest 4% from the $215.1 million that Trulieve reported in the previous period. 

The one number that may be of concern to Curaleaf investors is adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). In Curaleaf's Q3 results, its adjusted EBITDA profit of $71.4 million was down 15% from Q2's tally of $84.4 million. Its adjusted EBITDA margin of 22.5% was much lower than the 27% it netted previously, with the company blaming the erosion on lower gross margins, greater headcount, and more overhead.

While it's promising that the company is still profitable, the challenge will be keeping its adjusted EBITDA number from falling further down. Curaleaf announced this month that it would be acquiring another cannabis business -- Tryke Companies, which has operations in Nevada, Arizona, and Utah. Although Curaleaf says the deal "will be immediately accretive to our margins and cash flow," it will also come with additional overhead.

I wouldn't press any panic buttons just yet, but it also isn't smooth sailing right now for Curaleaf.

Is Curaleaf a buy?

Curaleaf is one of the top marijuana stocks in the country, but its recent numbers don't provide much reassurance that the growth will continue without relying on further acquisitions or new markets opening up. With minimal sales growth and a worsening bottom line, it's not going to get any easier for Curaleaf to report better numbers in future quarters. 

If you're inclined to buy the stock, the best move may be to wait right now. Trading at a price-to-sales multiple of 6.6, it's not cheaper than its key rival Trulieve, which is at a multiple of just under six. Plus, the Florida-based company also has much stronger margins -- its adjusted EBITDA is more than 40% of revenue. And there are also many smaller, more underrated cannabis stocks to consider that could provide better returns for investors over the long run.

While Curaleaf can be a promising long-term investment to hold in your portfolio, it may not be the best stock to buy right now.