Replies to post #404 on Marijuana Stocks & Plays

[Golden Cross]

Lo and Behold: The Only Marijuana Value Stock
Motley Fool
Sean Williams, The Motley Fool
Motley FoolMarch 8, 2018
Next to cryptocurrencies, few industries have been hotter for a longer period of time than marijuana stocks. Over the trailing-two-year period, many of the largest pot stocks by market cap have risen in value by between 1,000% and 2,000%. Not too shabby when you consider that the stock market tends to appreciate about 7% per year, inclusive of dividend reinvestment and when adjusted for inflation.

The buzz behind the cannabis industry is the expectation of rapid growth amid a steady shift in the public's perception toward pot. What was once a taboo topic is now something covered by lawmakers in state legislatures on Capitol Hill. Every major survey released over the trailing year has demonstrated overwhelming support for legalizing cannabis, with even stronger support noted for medical marijuana, in the United States.

Dried cannabis buds next to a piece of paper that says yes, lying on dozens of miniature Canadian flags.View photos
Dried cannabis buds next to a piece of paper that says yes, lying on dozens of miniature Canadian flags.
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Image source: Getty Images.

Expected recreational legalization in Canada sends pot stock valuations through the roof
Of course, investors are really excited about the potential for legalizing recreational marijuana in Canada by this coming summer. Medical marijuana has been legal in our neighbor to the north since 2001, but legislation currently being reviewed in parliament could make it the first developed country in the world, and second overall behind Uruguay, to have legalized adult-use cannabis. If approved, it could add $5 billion in annual sales to the legal weed industry, if not more.

The expectation of legalization by this summer has a lot of investors envisioning hefty profits for pot stocks. It's also pushed valuations for these companies into nosebleed territory. The vast majority are trading at huge forward price-to-earnings multiples, assuming they'll be profitable. Some examples include:

Canopy Growth Corp.: forward P/E of 659.
MedReleaf: forward P/E of 88.
Aurora Cannabis: forward P/E of 98.
Cronos Group: forward P/E of 304.
Mind you, this doesn't include the dozens of pot stocks that aren't expected to be profitable in 2019 that have nevertheless seen their valuations soar by triple or quadruple digits. This is a high-growth industry, but it's rarely, if ever, referred to as a "value" with future P/E ratios like these.

However, the generalization that value stocks don't exist in the marijuana industry, while true for most pot stocks, isn't true for them all. There is one marijuana stock that could very well could be called both a growth story and value stock. That company is OrganiGram Holdings (NASDAQOTH: OGRMF).