CannTrust Stock: How This Marijuana Stock Became Canada’s Latest Unicorn

CannTrust Stock
iStock.com/OlegMalyshev

This Underdog Just Became Canada’s Billion-Dollar Marijuana Company

We are less than six months away from Canada’s full marijuana legalization day, and the country’s largest marijuana companies have begun preparing for it. If you’ve been keeping tabs only on the biggest marijuana stocks, one underdog may have quietly slipped under your radar.

Pay close attention, because this company has just become the latest unicorn of the Canadian marijuana industry. I’m talking about CannTrust Holdings Inc (OTCMKTS:CNTTF, CNSX:TRST), which is now the fifth Canadian marijuana company to have attained a billion-dollar market capitalization.

Allow me to break down why I believe CannTrust stock is the dark horse of Canada’s marijuana industry.

Why CannTrust Stock Just Achieved  “Unicorn” Status

Wall Street’s charging bull has crossed the northern border into Canada to graze on the “green grass.”

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Canadian marijuana stocks have entered a bull market and investors are making a killing. Canada’s top four marijuana stocks by market cap—the four unicorns of the weed industry—are all rallying.

Here’s how these four companies—Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED), Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), Aphria Inc (OTCMKTS:APHQF, TSE:APH) and MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF)—stacked up against each other on the stock price performance chart over the past year.

CannTrust Stock

Chart courtesy of TradingView.com

Nicely sandwiched between the top two performers, Canopy Growth and Aurora Cannabis, is CannTrust stock (in blue). This underdog quietly added millions of dollars to its market cap in 2017, and it has just crossed the billion-dollar mark in the new year.

While you could argue that CannTrust’s remarkable performance is owed to the present bull market, I would still contend that it is largely because of CannTrust’s strong fundamentals working in the background.

I pitched CannTrust stock to my readers about a month ago, suggesting that TRST stock could turn out to be a multibagger in 2018. I cited one key reason why I believed so. Take note that the stock is up about 50% since then.

CannTrust is a rare gem. It is one of the very few marijuana companies that’s profitable. Mind you, profitable marijuana companies are as rare as hen’s teeth. The majority of marijuana producers are barely breaking even, and things are only about to get worse for them.

This is because, in the past year, during which the Canadian government indicated that it would be fully legalizing weed for recreational use in the country, a huge wave of new marijuana growers flowed into the industry. These new entrants nudged the industry’s substructure that long supported its monopolist Canopy Growth. From there on, the dynamics of this industry were altered for good.

Today, way too many contenders are nabbing market share, but it’s obvious that only a few will manage to survive in the long run.

Here’s what will happen.

On one end of the spectrum, full legalization would paralyze, if not fully kill, the black market for marijuana. This would consequently cause a drop in marijuana prices because the green herb would become readily available.

On the other end of the spectrum, all these new producers would engage in a price war, just as you would expect in any competitive industry. This would further aggravate their troubles as their product’s retail price would begin to spiral downward.

With that context in mind, ask yourself: “Should I invest in a company that’s already struggling to make ends meet? Or should I invest in one that’s profitable and can withstand a drop in its margins?”

If you are picking the latter, then CannTrust may be your best bet.

More Reasons to Be Bullish on CannTrust Stock

Profitability is just one fundamental that is driving CannTrust’s price rally. Another is growth.

Remember that high-growth stocks tend to deliver exponential rewards in their early years. Compared to its peers, CannTrust is a higher-growth stock.

Just look at its quarterly sales growth. The company posted its quarterly revenue earlier this week, setting a new record of $7.0 million in sales. This marked a 233% growth in sales from the same period the year earlier. (Source: “CannTrust Reports Record Revenue for Q4 and…” CannTrust, January 9, 2018.)

This is the highest growth figure recorded among the top players in the marijuana industry in the past quarter. Also, this is not a one-time deviation from the mean. CannTrust’s preceding quarter’s sales growth was a whopping 680%—again, the highest in the industry.

CannTrust is growing by leaps and bounds!

Furthermore, this medical marijuana company has recently received its license from Health Canada to begin shipping its medical cannabis and derivative products internationally. CannTrust has already found a market in Australia, and it is making its way into Europe later this year.

In Canada, CannTrust has a solid base of 35,000 active patients—a number that’s easily comparable to its bigger peers. There’s a reason why this small company has managed to sign up so many patients in a short span of time.

CannTrust grows its weed in water, not soil. The technique is called hydroponics, and it helps CannTrust avoid the use of pesticides on its crop. As you can tell, “100% pesticide-free” makes for a good selling point in the industry.

CannTrust is also in the process of expanding in Canada. Its current production capacity stands at about 50,000 square feet. But, by summer, that capacity will have grown eightfold!

The Vaughan, Ontario-based CannTrust is building a site in Niagara, which is currently in its second phase of expansion. This facility will increase CannTrust’s capacity to 430,000 square feet. CannTrust is expected to be producing somewhere close to 40,000 kilograms of weed annually by the second half of this year.

With all these positive signals flashing before my eyes, I’d be a fool not to consider CannTrust stock as one of the best marijuana stocks for 2018.

Analyst Take:

The marijuana industry will be growing at a supersonic pace in 2018. All the big players are undergoing extensive expansion and opening new production facilities this year.

Of the 84 licensed production sites in Canada, more than half were licensed just last year. My point is that far too many marijuana companies have entered the market ahead of legalization day and, as the environment gets lethally competitive, only a handful of these marijuana stocks will stand the test of time.

So, it may be a good idea to side with a profitable, high-growth venture like CannTrust. This Canadian marijuana stock is one of the best in the bunch.