Within the cannabis industry, there are two extremely profitable sub-sectors. The marijuana stocks that identify as either MSOs or extraction based cannabis stocks, both can have higher rates of profitability than most others. Although investors tend to focus heavily on only the top three marijuana stocks by market cap, the companies that are in this area of the cannabis industry happen to have a higher chance of long term success than others. There are several reasons behind this including their business models and the higher rates of profits that come naturally in these sectors. In addition, these areas have lower barriers to entry and therefore are less capital intensive in the beginning.
This means that they can achieve profitability much faster than most other cannabis stocks. But, investors should not just assume because a marijuana stock fits into one of these categories that it will be profitable. Rather, they should note the financials and the business models of the cannabis stock as it moves into the future. Often times investors can only focus on the short term rather than on a companies long term potential. But, with projections showing massive growth for the next few years, it seems as though the long term is extremely important. For this reason, these two marijuana stocks continue to be marijuana stocks to watch.
A Leading Extraction Marijuana Stock
Valens Corp. (VLNCF Stock Report) is one of the most prominent Canadian extraction service providers in the cannabis industry. The company has stated that it has a very clear forward-thinking plan for the rest of 2020 and beyond. Estimates have shown around $0.23 in growth per share for the 2020 year. But, the company has shown some great potential for the near future. Because derivatives were only legalized a few months ago in Canada, the potential has truly yet to be tapped into. Consumers continue to show extremely high rates of interest in these alternative products, and this continues to put Valens in a great position moving forward.
With many companies not having the materials to manufacture derivatives, Valens is used as an ESP by many of the largest cannabis companies. In addition, the company usually works off of large and long contracts that can mean consistent profits and revenue for years to come. Of course, its business does remain on the continuance of these contracts, but it does not look like Valens will have a tough time getting more buyers for its products. Because of this, it remains a leading marijuana stock to watch.
A U.S. MSO With a Potentially Bright Future
Trulieve Cannabis (TCNNF Stock Report) is one of the leading U.S. based MSOs. The company has continued to show high rates of profitability on a very regular basis. This has helped to bring the company into the limelight in the past few months. Recently, the company reported north of $250 million in sales with $163 million of that going to gross profits. In addition, the company only had around $75 million in operating expenses which is quite small compared to its overall income.
The company has staked a heavy claim in the Florida market where cannabis has yet to go full rec. With more than 4 dozen dispensaries in the Sunshine State, Trulieve has a very advantageous position there. In addition, the company has many dispensaries across the nation, but its focus does remain in Florida. If Florida chooses to go full rec in the next year or so, it would be big news for Trulieve. For this reason, investors should continue to view this company as a leading marijuana stock to watch.
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