A promising industry for growth-oriented investors to target is cannabis. While marijuana itself is federally illegal in the U.S., that hasn't stopped more states from legalizing it. For multi-state marijuana operators, that means new markets are continuously opening up. One of the biggest states to recently legalize recreational pot is New York, which will likely open for business later this year.

One company that is among the largest cannabis producers in the U.S. is Green Thumb Industries (GTBIF -0.70%). And it just reported some encouraging earnings numbers which suggest that it could be on track to generate over $1 billion in revenue over the next 12 months.

Green Thumb posts 15% sales growth in Q2

On Aug. 3, Green Thumb released its second-quarter earnings for the period ending June 30. Sales of $254.3 million in Q2 were up 15% on a year-over-year basis, and more importantly, up 4.8% from the previous period. It's a small but notable improvement because cannabis companies have been struggling to generate meaningful growth this year, and Green Thumb is coming off a quarter where sales dipped from the previous period.

Charts showing Green Thumb's revenue and quarter-over-quarter revenue growth rising since early 2022.

Data by YCharts.

Oversupply issues have been plaguing the industry, and that hasn't made it a particularly attractive option for growth investors. But the bump up in sales this past quarter could suggest that better numbers may be ahead for the industry.

Green Thumb notes that the key catalyst behind its stronger sales was due to the New Jersey retail cannabis market. Adult-use sales opened up in New Jersey on April 21, so this was the first period where Green Thumb benefited from the new market.

If all Green Thumb does is maintain this level of revenue, it will be on track to hit $1 billion over a 12-month period. It is already hovering around that mark right now, with sales of $942 million over the trailing 12 months. It'll mark an important milestone for a company that generated just $62 million in revenue in 2018.

Why sales are likely to continue climbing

Green Thumb has 77 retail locations and notes that it has a pipeline of licenses that could see it doubling that count. One of the reasons the company's stores can capture a good chunk of the industry's growth is that it has multiple types of brands that can help meet customer demand. Its Rise brand of stores is its flagship banner but there is also its Essence stores which promise a boutique-like experience where staff helps guide consumers in searching for the right cannabis product. Green Thumb also has a broad spectrum of consumer brands that cover flower, vape, edible, and topical products.

Green Thumb is in a solid position to take advantage of any new markets that open up and meeting varying demand. And New York, in particular, could be a promising one for the company. Green Thumb is transforming an old correctional facility in New York into a cannabis growing facility. By next year, it could be up and running and producing marijuana and supplying the company's dispensaries within the state. There could be considerable opportunities for Green Thumb to tap into here as by 2025, New York is likely to be among the top five markets for marijuana.

The company's business is also well-funded to be able to take on more growth opportunities as they come up. As of the end of June, the company reported cash and cash equivalents of $145.3 million. Although its operating cash flow was a negative $15 million during the past three months, when looking at a broader six-month period, cash flow was positive, totaling nearly $40 million. Cash flow can fluctuate depending on a business' working capital needs and as of now, it doesn't present a big concern for Green Thumb.

Is Green Thumb Industries a buy?

Shares of Green Thumb Industries are down 54% this year, which is in line with how the AdvisorShares Pure US Cannabis ETF has performed. Stocks in the cannabis industry have been struggling due to the growth headwinds noted earlier, along with a lack of progress on federal legalization. But for long-term investors looking to capitalize on the industry's growth potential, Green Thumb can be an attractive buy. Compared to other major multi-state operators, its valuation is fair and significantly lower than where it was a year ago.

Chart showing Green Thumb's PS ratio falling  but staying roughly equal to those of other top cannabis companies since late 2021.

Data by YCharts.

Although rival Trulieve Cannabis is technically cheaper, it is heavily exposed to Florida (it has 110+ locations there), whereas Green Thumb's presence is less dependent on one specific state. Either investment could deliver strong gains, but for more diversification, investors may want to opt for Green Thumb.