For cannabis investors, the TSX index abounds with opportunity. Home to two out of the three largest cannabis companies in the world, it’s the de-facto home of the pot industry. While some cannabis companies are dual listed on the TSX and American indexes, many others are TSX exclusives. This makes the TSX a veritable “one-stop shop” for pot stocks.
But with so many cannabis stocks trading on the TSX, it raises a question: “which one do I pick?” The TSX has more than half a dozen pot stock listings, and they’re not all created equal. Some are rapidly growing enterprises inching closer and closer to profitability; others are stagnating with so-so revenue growth and no positive earnings in sight.
In this article, I’ll be sharing my picks for the three top cannabis stocks on the TSX. Each of these stocks is experiencing rapid growth, investing in expansion, and making big waves in the financial press. There are significant differences between them, as well, but all of them share they key quality of being poised for success in the era of pot legalization.
I’ll start with one that everybody’s heard of.
Canopy Growth (TSX:WEED)(NYSE:CGC)
What can be said about this stock that hasn’t been said already? It’s growing rapidly, with 63% quarterly revenue growth. It’s expanding abroad, with plans to become a dominant cannabis player in 11 countries. And it’s seeing major support from institutional investors, as witnessed earlier this year in the form of the Constellation Brands (NYSE:STZ) investment.
If revenue growth and market share are important metrics for you, then Canopy might just be the pot stock to buy. It’s also worth noting that this company is among the lowest-cost cannabis producers, as it is able to manufacture raw flower for just $0.79 per gram. Earnings have been a persistent sore spot on the company’s income statements, but that mostly has to do with its major investments in international expansion.
Aurora Cannabis (TSX:ACB)
Aurora surprised everyone last quarter with a growth blowout: revenue was up 223% and earnings were solidly positive for the first time ever at around $70 million. Granted, the earnings came from unrealized gains on securities; operationally, the company still lost money. But with the strongest revenue growth in the cannabis industry by far, Aurora stock may be a buy — assuming the company’s ballooning costs can be brought under control.
CannTrust Holdings (TSX:TRST)
Last but not least, we have CannTrust Holdings. CannTrust is a licensed marijuana producer that develops a wide variety of cannabis extracts, oils, capsules, and gels. On October 18, the company announced that it would put together a sales team to help get its recreational cannabis products to the market. This spells good news for the company, which has been getting less attention in wake of legalization than its competitors Canopy and Aurora.
CannTrust is the best cannabis stock from a value perspective: with a trailing P/E ratio of just 60, it has the cheapest valuation in the sector. And, CannTrust’s positive earnings are not just a matter of “flash in the pan” investment gains: the company has posted positive operating income in the last four quarters, in addition to positive net income. This makes CannTrust, in my opinion, the most consistently profitable pot stock on the TSX index.
Fool contributor Andrew Button has no position in any of the stocks mentioned.