OrganiGram Holdings Vs CannTrust Holdings Stock

Organigram vs CannTrust Stock: With legalization efforts springing up around the world, the global marijuana industry is predicted to reach a size of $66 billion by 2025, with a compound annual growth rate of 24 percent. Canada is one of the most promising markets for marijuana, where the drug is permitted both for medical and recreational use.

The nationwide legalization of marijuana in Canada in 2018 has opened up promising opportunities for investors who aren’t afraid of the market’s potential volatility. But which Canadian marijuana company should you buy: OrganiGram Holdings [NASDAQ: OGI] or CannTrust Holdings [NYSE: CTST].

Pros and Cons of Investing in Canadian Marijuana Companies

One traditional drawback of the marijuana industry is that the space is inherently riskier, due to continually shifting political and societal attitudes toward the drug. This concern is more relevant in the United States, where recreational marijuana has been legalized in several states despite still being illegal under federal law.

While Canadians are more accepting of marijuana, the issue is by no means settled. Just 52 percent of Canadians approve of legalized cannabis according to a 2018 poll, while 41 percent disapprove. What’s more, only 34 percent say that they felt “positive” about the use of marijuana.

Another issue with investing in Canadian marijuana companies is that it’s still hard to judge whether these stocks are valued correctly.

Cannabis was only legalized recreationally on the federal level in October 2018. As a result, the historical sales of Canadian marijuana companies year over year still reflect a time when the drug was legal for strictly medical purposes, which can make the sales figures seem more inflated than reality.

Still, the possible returns from marijuana stocks are hard to pass up for savvy investors who aren’t afraid of future uncertainty. As the industry continues to grow, new companies will enter the market and old ones will increase in value. The cannabis industry is still very much a “Wild West” that offers exciting potential for growth, especially with the release of new products such as edibles, beverages, and vapes.

Is OrganiGram Holdings a Buy?

OrganiGram Holdings is a Canadian producer of premium cannabis for medical and recreational purposes. The company was founded in 2010 and is headquartered in Moncton, Canada.

Perhaps the biggest selling point for OrganiGram right now is the company’s extremely low valuation: roughly 8 times its sales for 2020. This makes OrganiGram seem like an excellent bargain, especially when compared with many of its competitors.

OrganiGram also sets itself apart in the crowded Canadian marijuana industry via several factors. The company prides itself on producing “high-quality” cannabis: in 2018, it received nine different nominations in the Canadian Cannabis Awards.

In addition, OrganiGram Holdings [NASDAQ: OGI] is currently researching the production of cannabinoids via biosynthesis, an alternative natural method that results in higher purity of the final product and lower production times and costs.

Nevertheless, there’s at least one substantial reason to hesitate before buying OrganiGram Holdings stock: its size. OrganiGram Holdings [NASDAQ: OGI] is not one of the top 5 licensed cannabis producers in Canada, which means that it can’t benefit from the same economies of scale as its larger competitors.

Still, OrganiGram Holdings [NASDAQ: OGI] has joined forces with partners like the German medical marijuana producer Alpha-Cannabis, which should help it expand into international markets.

Should You Invest in CannTrust Holdings?

CannTrust Holdings is a Canadian producer of pharmaceutical-grade medical cannabis. The company was founded in 2015 and is currently headquartered in Ontario.

In 2019, CannTrust Holdings [NYSE: CTST] reached a major milestone when shares of the company began to trade on the New York Stock Exchange. However, CannTrust’s disappointing Q4 results released in March caused the company’s stock to plunge by 16 percent. Since then, things have gone from bad to worse, with shares losing nearly three-quarters of their value.

The primary reason for this drastic decline is the news of a major scandal. CannTrust Holdings [NYSE: CTST] admitted that it had been growing marijuana in unlicensed rooms at its Niagara facility, although these rooms were later licensed in April.

As a result, Canada’s public health department has put a hold on the sale of marijuana from these rooms, causing CannTrust to freeze all sale operations until it receives its punishment from the government.

Despite this bad news, CannTrust Holdings [NYSE: CTST] may not be a bad investment right now for those looking to gobble up the stock at a cheap price. The company has announced its plans to grow cannabis at an outdoors facility in British Columbia, and has also recently partnered with Canadian alcohol distributor Breakthru Beverage Group.

OrganiGram Holdings Vs CannTrust Holdings Stock: The Bottom Line

Both OrganiGram Holdings [NASDAQ: OGI] and CannTrust Holdings [NYSE: CTST] hold promise for investors looking to enter the Canadian marijuana market. However,

OrganiGram seems like the smarter buy at this stage, even disregarding the current scandal that CannTrust faces.

OrganiGram has a market capitalization of $1 billion vs. CannTrust’s $750 million, yet OrganiGram’s Q4 revenues are twice as high as CannTrust’s. For now, this may make it the less risky choice in an industry that’s already quite volatile and uncertain.

If you’re not sure where to park your money, another possibility is the Cannabis ETF [THCX] where CNBC’s Jon Najarian is an advisor.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.