Canadian pot stocks became investors' favorite at one point as the industry boomed after Canada legalized cannabis. However, those companies are now struggling to achieve profitability. Meanwhile, U.S. pot growers are operating in a limited legal market yet have sky-high revenues and some are even profitable.
At this point, the U.S. pot stocks' performances are not reflecting how outstanding these companies are. But that shouldn't demotivate investors and make them abandon these high-growth companies. A little bit of patience with these could repeat history and make investors rich. I believe these three cannabis multi-state players (MSOs) are capable of doing that. All three have more than doubled over the past two years, compared with the S&P 500's gain of 90%.
1. Trulieve Cannabis
The reason Trulieve Cannabis (TCNNF -1.93%) grew from a small medical cannabis company to now owning 162 dispensaries in 11 states is because of its focus on its roots. The company set a solid foundation in its home state of Florida just with the medical cannabis business. It owns 113 dispensaries in the state, holding a dominant position. This strategy has also allowed Trulieve to be profitable from an operational standpoint for 16 consecutive quarters. For the full year of 2021, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $384.6 million compared with $260 million in 2020. Adjusted net income also jumped 2% year over year (YOY), to $123 million for the full year. An 80% year-over-year growth in revenue to $938 million drove this performance.
Trulieve could grow stronger now that it has expanded by acquiring Harvest Health & Recreation last year. The acquisition gave it access to key cannabis markets in Arizona, Pennsylvania, and Maryland. Management hopes to see another strong year. According to the guidance, revenue could be in the range of $1.3 billion to $1.4 billion, and adjusted EBITDA in the range of $450 million to $500 million for 2022.
2. Cresco Labs
Illinois-based MSO Cresco Labs (CRLBF 0.49%) dropped a monster merger announcement last month soon after its quarterly results. The company will be acquiring all the issued and outstanding shares of peer cannabis company Columbia Care, upon regulatory approvals. The deal is valued at an estimated enterprise value of $2 billion and could close by the fourth quarter of this year.
Cresco believes this acquisition will give the company a solid footprint in 70% of the addressable cannabis market, and on a pro forma basis, the combined company will be the largest cannabis company by revenue.
Currently, Cresco operates 50 stores nationwide, but even with this small number, the company has grown revenue by 73% year over year to $822 million in 2021. It also saw a 219% YOY jump in EBITDA to $194 million. With Columbia's assets in the portfolio after the deal seals, Cresco will hold more than 130 dispensaries in 18 states.
3. Green Thumb Industries
Another Illinois-based MSO that is rising to be a top contender is Green Thumb Industries (GTBIF 0.27%). Green Thumb has managed to bring in profits according to generally accepted accounting principles (GAAP) for six quarters in a row. Its full-year results were more than impressive. Net income for the year of $75.4 million was a drastic jump from $15 million in 2020, driven by a solid 60% growth in revenue of $893 million. The company saw increased traffic in all 73 of its open and operating dispensaries, which drove this growth.
Green Thumb's Q4 also marked its second consecutive quarter of positive cash flow from operations, which allows it to use the money for expansion this year. It has already opened four new stores, bringing its total store count to 77 this year.
Future looks bright for these cannabis stocks
Wall Street believes these pot stocks could double again, and I agree. Analysts see upsides of 230% for Trulieve, 157% for Cresco and 86% for Green Thumb's stocks in the next 12 months.
Note that these pot stocks have grown to this extent just from a limited legal market. With more states legalizing cannabis this year, more doors of opportunities will open. And any positive movement toward federal cannabis reforms will take the stock price higher. Growth stocks need a good amount of time to reveal their true potential. The stocks are also cheaply valued now, with price-to-sales ratios hovering between 1 to 4. Market pessimism has pulled down these cannabis stocks way below their 52-week high now, making it the right time to buy the dip and hold them for the long haul.