Most of the major North American cannabis companies have underperformed the market's return of 34% over the past three years, but not Green Thumb Industries (GTBIF -1.96%). Since late 2019, its shares are up by 58%, making its shareholders proud amid a sea of competitors that proved abysmal investments. Tilray Brands, for instance, lost nearly 79% of its value. 

But can the U.S. multi-state operator (MSO) one-up the market and the rest of the marijuana industry's public businesses once again over the next three years? It's actually quite likely, and here's why. 

Building momentum 

Green Thumb's future looks very much like a continuation of the best elements of its recent past. Since 2020, its trailing-12-month revenue has burgeoned, rising by 350% to reach $974 million. To accomplish that feat, it scaled up its production facilities as well as its number of stores, focusing on state markets where cultivation and distribution licenses are scarce and tightly controlled, such as Massachusetts, Illinois, and New Jersey.

It also worked to differentiate its brands from competitors' while selling more high-margin products like vaporizers and edibles, and with comparatively less growth in its low-margin segments like dried marijuana flower. The jury's still out on whether its brands have enough customer loyalty today to keep consumers coming back for more, though management says brand building is still a strategic priority moving forward. In the long run, stronger brands would help to protect its market share and thus its margins.

Right now, its quarterly profit margin of 9.6% is on the thin side although it's important to note that management's goal for the coming years is to continue positioning Green Thumb for growth while maintaining positive cash flow. But as of the third quarter, it still isn't generating any free cash flow (FCF), and investors might need to wait a while before it actually does. The margin is likely to remain somewhat thin for the next three years, and that's just fine as long as revenue continues to rise as planned. For that to happen, it'll need to increase its penetration of the U.S. market, big time. 

As of the start of September, the company had 77 stores open nationwide, along with enough retail licenses in hand and in the approval pipeline to open at least another 77 stores. Between now and the end of 2025, expect nearly all of those stores to be open and bringing in fresh sales.

A small subset of the stores-to-be-opened are via an experimental collaboration with the convenience retailer Circle K in Florida that will see its medicinal cannabis products sold at 10 Circle K stores starting next year. If it's successful, expect Green Thumb to expand its relationship with Circle K and try to forge similar distribution collaborations elsewhere, as licensing permits. 

This year, management expects the company to bring in around $1 billion in revenue from its locations that are currently open. If we assume that each of the new stores performs, on average, identically to the existing locations, Green Thumb could thus double its annual revenue to more than $2 billion over the next few years. 

But is it going to gain in value?

The next 36 months will be critical for Green Thumb, and they also present an opportunity for enterprising investors. Currently, the stock's trailing price-to-sales (P/S) ratio is 3.3. If we assume that this multiple doesn't significantly change, that the company doesn't issue any new stock, and that sales actually double in three years, its market capitalization could be around $6.6 billion, which would put its share price at around $32. That implies an upside of around 135% compared to its price today.

Nonetheless, it's important to note that Green Thumb will have plenty of competition in its markets between now and 2026. Some of its competitors, like Trulieve Cannabis, are already strongly established in places like Florida where Green Thumb is looking for growth. Don't be too surprised if the company opts to exit or maintain a minimal presence in saturated state markets, as such moves might be necessary to protect its margin. 

Given its focus on markets where it can derive an advantage from owning a significant portion of the cultivation and sales licenses, it's reasonable to expect this company to at least partially accomplish its ambitious goals. And while there's a lot that could happen to disrupt the cannabis industry over the next few years, the fact that Green Thumb remained profitable in 2021 when many of its peers did not should give investors a measure of confidence in its ability to flourish.

Approach this stock as a moderate-risk option to invest in the U.S. marijuana industry, and it might prove to be quite rewarding.