Attitudes towards the legality of cannabis are slowly shifting around the world. Likewise, investor appetite for a growing number of cannabis company stocks is exploding. While most are traded in OTC markets, there are now a wide variety of cannabis-related investment options for investors. We’ll explore some cheap weed stocks in this article.
Most of the “household names” of the cannabis industry are either not publicly traded, or incredibly overvalued. So where does one find cheap marijuana stocks that may have more potential for appreciation over time? Right here is a good place to start!
Less Flash, Less Cash
The secret to finding cheap weed stocks that trade at reasonable P/E or forward P/E ratios is to skip over the flashy names. While Tilray trades at 4x it’s recent IPO price and Canopy Growth has a market cap of over $10 billion (despite a negative EPS of -$1.70), other lesser-known names may trade at more reasonable levels. Some of the best cheap weed stocks are outlined below.
OrganiGram Holdings Inc (OGRMF)
Recent stock price: $3.75
Forward P/E (estimate): 28
OrganiGram Holdings is a small cannabis grower listed in Canada. It’s available for investment in the OTC markets under the ticker OGRMF. More info here.
OrganiGram is less flashy than many rivals, largely because it’s a smaller operation. It focuses on its primary grow site, which aims to yield over 100,000 kg of cannabis per year by 2020. By having a single grow site as the focus, OrganiGram – and its investors – hope to see better margins and quality control.
They are also focused on being a reliable supplier of high quality products, including cannabis oils. The management team appears to be taking a quality over quantity approach, which is rare for publicly traded cannabis firms. It’s difficult to say how this approach will play out, as there is much uncertainty surrounding the future pricing power of the larger cannabis producers.
OGRMF currently trades in the $3.50-$4 per share range, with a reasonable forward P/E of around 28, according to the latest estimates.
CannTrust Holdings Inc (CNTTF)
Recent stock price: $5.50
Forward P/E (estimate): 24
CannTrust Holdings, another Canadian grower, is another good cheap marijuana stock. It trades under the ticker CNTTF on the NASDAQOTH. You can listen to their most recent earnings call here.
CannTrust is both a grower and a producer of various cannabis products, including oils. This allows them to boast higher margins than many of their peers, and they maintain a significant foothold in the Canadian medical marijuana market. They are certainly not the largest producer, but their focus on high quality and unique products gives them an edge.
Planned expansions will increase CannTrust’s growing capacity to more than 1 million square feet, potentially allowing it to further improve operating margins while increasing output.
Based on recently available data, the company trades at a forward P/E of about 24. The share price is currently trading in the $5-$6 range. From a fundamentals standpoint, this is one of the cheapest weed stocks out there.
KushCo Holdings, Inc (KSHB)
Recent stock price: $5.50
Forward P/E (estimate): N/A
KushCo Holdings, formerly known as Kush Bottles, is a bit of a different company than the others on this list. KushCo does NOT grow or produce any cannabis products. Instead, they are an ancillary provider, selling packaging solutions, vaporizers, branding solutions and more.
Their position as a ancillary cannabis company puts them in a unique – and potentially lucrative – position. While cannabis producers fight viciously for market share in a low-margin industry, KushCo benefits from the overall growth of the cannabis market – and appears to have fewer direct competitors than most growers.
KushCo is also headquartered in the US, whereas most weed stocks are located abroad (mostly in Canada). It trades at a reasonable level, and while it doesn’t have the same flash as the large cannabis producers, it still may be a worthwhile investment to look into.
KushCo is currently trading in the $5-$6 per share range. Earnings per share are negative, but management’s outlook is positive. Given the non-producer status of KushCo, this company presents a unique play on the cannabis industry.
Thoughts on Cheap Weed Stocks
If you want to find cannabis related stocks that aren’t trading at insane valuations, this list of cheap marijuana stocks is a good place to start. There are definitely other options out there, so we encourage you to explore! You can get some other ideas and industry data over at The Marijuana Index, a third-party industry watch group.
Disclaimer: The author has no position in any stock listed here. Investing in stocks carries risk, particularly when it comes to cannabis stocks.
This article is intended only as a starting point for your own research. You should always do your own due diligence on any investment you are considering.