Cresco Labs (CRLBF -0.61%) is one of the leading companies in the marijuana industry. However, the share price of the multi-state operator has crashed by 75% over the past 12 months as the excitement the industry once enjoyed looks to be long gone. Is this an opportunity for investors, or are they better off avoiding Cresco Labs?

Cresco has been struggling to generate growth

When Cresco Labs last reported results in November, its sales figure was a bit underwhelming. At $210 million, revenue for the third quarter was down 2% year over year. Despite the opportunities that new and emerging markets presented, falling prices have been hurting the business. And looking at its quarter-over-quarter revenue growth of late, it's obvious that Q3's results were simply the continuation of a troubling trend -- one that has hampered many other MSOs as well.

CRLBF Revenue (QoQ Growth) Chart
Data by YCharts.

The one consolation for investors is that Cresco Labs continues to post operating profits. However, the impact of its worsening margins can be seen on that metric as well. The company's operating income of $16.2 million last quarter was down 28% from the $22.7 million it reported in the previous period.

Its Columbia Care acquisition should close soon

One event that should inject some growth into Cresco Labs' business is the looming acquisition of rival MSO Columbia Care (CCHWF -0.05%). Cresco Labs expects that transaction to close in the first quarter.

In the original press release announcing the acquisition, Cresco Labs said the $2 billion transaction would make its business "the new leader in cannabis." Acquiring Columbia Care would give Cresco Labs a presence in more state markets and make it a leader in many of them, including Illinois and Pennsylvania. It could also set the company up to be a top-three business in New York, New Jersey, and Florida.

Given all that growth potential, it's surprising that investors aren't placing a higher value on the business.

Cresco Labs stock looks incredibly cheap

Despite all the growth opportunities that exist in the cannabis industry, Cresco Labs' stock has been struggling, and it is down around its 52-week low right now. It is severely discounted and is trading at a price-to-sales multiple of less than 1.

CRLBF PS Ratio Chart
Data by YCharts.

Should you buy shares of Cresco Labs?

Cresco Labs has lots of potential, especially as more states consider legalizing marijuana. The challenge right now is that there isn't much optimism around the industry given that marijuana legalization at the federal level doesn't appear likely to happen anytime soon, and that has put off growth investors. The industry is also struggling amid inflation; that's evident in Cresco Labs' struggles to grow its top line.

If you're OK with waiting several years for the industry to recover, Cresco Labs could prove to be a good buy at current levels. The business isn't growing right now, but that's not a situation that I would expect to last long. And given Cresco Labs' low valuation, the pot stock could have lots of room to rise.