Cannabis stocks had a rough time over the past year, with the EFT Alternative Harvest ETF (MJ 0.86%) and the AdvisorShares Pure Cannabis ETF (YOLO 0.24%) down by more than 53% and 64%, respectively.

A glut of cannabis and falling revenues were the most obvious reasons for the share price declines of many cannabis companies. Investors also soured a bit on the sector when Congress again failed to advance federal decriminalization or pass the SAFE Banking Act.

However, despite the gloomy environment, a handful of cannabis companies reported double-digit percentage revenue gains in the third quarter, either sequentially, year over year, or both. Three that stand out among them are Ascend Wellness (AAWH 0.05%), Jazz Pharmaceutical (JAZZ 0.09%), and Green Thumb Industries (GTBIF -1.26%).

Ascend reported net revenue of $111.2 million in the quarter, a gain of 14% sequentially and 18% year over year. Jazz, a pharmaceutical company that uses cannabinoids in its therapies, reported sales of $940.6 million in the quarter, a gain of 12% over the same period last year. Green Thumb Industries reported third-quarter revenue of $261 million, up 3% sequentially and 12% year over year.

Let's take a look at what each company is doing right.

Chart showing revenue growth for three cannabis companies.

Sources: Author research, company reports.

Ascend Wellness finds being late is better

Ascend has 30 dispensaries across Illinois, Michigan, Ohio, Massachusetts, New Jersey, and Pennsylvania, and it's building more. 

Its shares are down more than 70% over the past 12 months, but its financials are headed in the right direction. Since the company was founded in 2018, it has focused on entering states where medical cannabis use is legal just before they become adult-use states, based on the premise that there are more profits to be had in states where recreational use is allowed.

The strategy paid off for Ascend in Illinois two years ago, and again in New Jersey in 2022. The company said it is looking to do the same thing in Ohio and Pennsylvania, two medical-use states that may legalize adult-use sales in the next few years. It recently bought the rights to one cultivation facility and six dispensaries in Pennsylvania, and over the summer, it purchased Ohio Patient Access, which had three dispensaries in the process of being built. That deal gives Ascend five dispensaries in the Buckeye state -- the maximum any individual company is allowed there under current law. Ascend also bought two licenses in Illinois, which will give it the ability to operate 10 dispensaries in that state -- its legal maximum.

Jazz Pharmaceutical finding cash in sleep

Jazz Pharmaceutical is an ancillary cannabis stock. It specializes in oncology and neuroscience therapies, including Epidiolex, a cannabidiol-based antiseizure medication, as well as Sativex, a cannabidiol-based therapy used to treat spasticity in multiple sclerosis patients, though it has thus far only been approved overseas. 

A key driver of the company's revenue surge was its Oxybate franchise of Xywav and Xyrem, both of which treat the symptoms of excessive daytime sleepiness. Together, their sales rose 11% year over year to provide $511.9 million of the company's $940.6 million in third-quarter revenue. However, Epidiolex is also doing well -- its sales grew by 22% in Q3 to $196 million.

Green Thumb Industries is consistently profitable

Unlike the first two companies under discussion here, Green Thumb isn't just growing its revenue -- it's also growing its profitability. Green Thumb reported a gross profit of $131 million in Q3, up slightly year over year. 

It has grown conservatively as it has delivered nine consecutive quarters of positive net income while focusing on boosting the name recognition of its seven brands.

The company has 18 manufacturing sites, and 77 open dispensaries across 15 states. It focuses on adult-use states and states that are viewed as likely to become adult-use in a few years. It has gone from a company with $7 million in annual revenue in 2016 to estimated annual revenue of $1 billion in 2022. It also has shown the ability to think outside the box, as illustrated by its idea to open RISE Express dispensary locations adjacent to Circle K convenience stores in Florida.