Green Thumb Industries (GTBIF -4.33%) and Trulieve Cannabis (TCNNF -5.95%) are two of the most successful marijuana multi-state operators (MSOs) in the U.S. Each company managed more than $1 billion in sales in 2022 but also saw net income fall year over year.

Green Thumb's shares have performed better lately, down 5% so far this year and 45% over the past 12 months. Trulieve's shares are down more than 17% in 2023 and more than 66% over the past year. However, as we all know, past performance doesn't guarantee future results.

The two MSOs are likely to be two of the survivors in the industry, but if you're looking to invest in one pure-play cannabis growth stock, which one should it be? Let's see.

The case for Green Thumb

Green Thumb finished 2022 in the black, with $12 million in net income or earnings per share (EPS) of $0.05, while Trulieve reported a loss of $246.1 million, or an EPS loss of $1.31.

Green Thumb is more profitable because it is doing more with less. It has 77 dispensaries, a fraction of the 181 stores Trulieve owns, yet it had yearly revenue of $1 billion, not much less than Trulieve's $1.2 billion in 2022 revenue. 

Green Thumb has only $100.7 million in debt, which gives it more flexibility in looking for ways to grow. 

In the fourth quarter, the company reported revenue of $259 million, up 6% year over year, and it reported a net loss of $51 million, or $0.22 in EPS loss. Trulieve lost even more money in the quarter -- $77 million, or $0.41 in EPS loss.

Green Thumb has done a better job of marketing its brands: Beboe, Dogwalkers, Dr. Solomon's, Good Green, Incredibles, and Rhythm. Trulieve redid its brand portfolio in 2021, but its brands are not as well known as Green Thumb's.

The case for Trulieve

Trulieve isn't in the black, but it grew revenue more rapidly than Green Thumb in 2022, up 34%. The company's larger size could really come into play if federal decriminalization happens and MSOs are allowed to transport marijuana across state lines. 

The company's $2.1 billion acquisition of Harvest Health & Recreation in 2021 made Trulieve the largest MSO in the country in terms of dispensaries, but that deal is the biggest reason Trulieve isn't profitable. Now that Trulieve is figuring out how to meld the two companies together, it will likely find economies of scale that it will be able to use to its advantage. It already appears to be getting closer to making a profit. It reported an EPS loss of $0.41 in the fourth quarter compared to an EPS loss of $0.61 in the third quarter.

The company also had, in the fourth quarter, a better gross margin of 50% and more gross profit of $150 million compared to 47.8% and $124 million for Green Thumb. A better gross margin is a good predictor of better future earnings.

Trulieve, despite its size, has less diversity in terms of what states it is in compared to Green Thumb because 32% of Trulieve's dispensaries are in Florida. That negative could easily become a huge positive if the state approves adult-use sales. Of the 21 states that have approved adult-use sales, 12 of them achieved that status through a ballot initiative, along with the District of Columbia. The Smart & Safe Florida adult-use sales initiative has over 416,000 of the 891,589 signatures it needs to be on the ballot in November. Trulieve, knowing how it would benefit from adult-use sales in the Sunshine State, has spent $25.5 million toward the initiative, including $20 million just in the fourth quarter.

A difficult choice

I believe these are two of the better-run MSOs in the U.S. While Green Thumb is more profitable now, its net income has been dropping every quarter, whereas Trulieve is already making adjustments to improve margins.

Trulieve has more cash -- $219 million through the fourth quarter compared to $178 million for Green Thumb, and Trulieve's plans to reduce costs could easily make the company cash-flow positive this year, which is its stated goal. It has said it plans to close less-profitable assets, lower production costs, and eliminate redundant positions to trim wages. It also said it plans to reduce inventory while launching its new indoor production facility.

It's hard to tell how long the shares of cannabis stocks will keep dropping, but in the long run, I believe Trulieve's size and greater revenue and gross margin numbers give it more options, making it a better long-term buy. Its purchase of Harvest Health & Wellness has yet to bear full fruit, but it will.