Canadian cannabis companies Aurora Cannabis (ACB -0.69%) and Canopy Growth (CGC -1.80%) have been rivals even before the recreational market in Canada opened in 2018. While the companies are still trying to get bigger and generate more sales, growing competition has made it difficult to dominate in a saturated Canadian market. As a result, their shares are down 80% and 72%, respectively, this year.

The companies have shifted their focus toward profitability to give investors something positive to rally around. Both businesses aim to become profitable on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis -- but which one will get there first?

Canopy Growth to be profitable by next year?

On Aug. 5, pot producer Canopy Growth released its first-quarter results for fiscal 2023. For the period ending June 30, the company reported that its net revenue of 110.1 million Canadian dollars was down 19% year over year. Its adjusted EBITDA loss also swelled to CA$74.8 million -- up from a negative CA$63.6 million in the prior-year period. The company blamed the worsening bottom line on a decline in gross margin, which it says was offset by a reduction in selling, general, and administrative expenses.

Earlier this year, the company projected that in the next fiscal year, 2024, it will achieve positive adjusted EBITDA. However, this excludes investments it plans to make in Biosteel (which makes nutrition products) and the recreational U.S. pot market, which is currently off-limits due to the federal ban on marijuana. Based on the asterisks that come with this target, a more realistic goal for adjusted EBITDA profitability without any conditions appears to be fiscal 2025 at the earliest; should the U.S. market open up before then, an increase in spending would be sure to follow.

Aurora seems to be the safer bet for profitability

Last month, it was Aurora's turn to release its results. Its numbers were for the same period (June 30) but were for its fourth quarter of fiscal 2022. Like its rival, Aurora struggled with growth as net sales of CA$50.2 million were down 8% year over year.

Its adjusted EBITDA loss of CA$12.9 million was down from the CA$21.8 million loss it incurred in the prior-year period. However, on a quarter-over-quarter basis, it was up slightly from a loss of CA$11.4 million. Aurora remains in cost-cutting mode and believes that by the end of the current calendar year, it will attain annualized cost savings of up to CA$170 million. And at that point, the business says it will be at a positive adjusted EBITDA run rate. 

If that turns out to be true, then Aurora could very well be on track to beat Canopy Growth. However, Aurora has missed expectations in the past. Two years ago, it projected that by the second quarter of fiscal 2021, it would achieve positive adjusted EBITDA. 

Although Aurora may miss its goal again, it looks to be close enough to adjusted EBITDA profitability that it will still get there well before its rival, especially since Canopy Growth looks intent on investing in growth opportunities in Biosteel and the U.S. pot market. Aurora, meanwhile, looks to be focusing on the medical marijuana market, which may lead to better margins but will likely result in less attractive growth opportunities in the long run.

Which stock is a better buy in the long run?

Even if Aurora hits its goal of adjusted EBITDA profitability before Canopy Growth, that still won't make the stock a better buy. Achieving adjusted profitability doesn't eliminate the risk (the company could still be burning through cash), and there's no reason to expect that doing so would fix its growth problems, either.

With Constellation Brands backing its business and sitting on nearly CA$770 million in cash and cash equivalents, Canopy Growth is the safer stock to buy. By comparison, Aurora reported CA$488.8 million in cash at the end of June. In addition, Canopy Growth's relationships in the U.S. with Acreage Holdings, Wana Brands, and TerrAscend, which should allow it to quickly penetrate the market south of the border upon legalization, give it a distinct advantage over Aurora in the long run.

Adjusted EBITDA profitability is a goal for both of these cannabis companies, but investors shouldn't give it too much attention as achieving it will not necessarily make one business a better buy than the other. Canopy Growth has a clear advantage in the end due to its more plentiful growth opportunities and with a significant investor in Constellation Brands.