Canadian cannabis stocks have grossly underperformed the markets for the past two and a half years.  However, U.S.-based multi-state operators have experienced impressive gains.

Though marijuana is still illegal at the federal level in the U.S., several states have legalized recreational cannabis in the last few months, and a majority of the regions already allow medical marijuana products. The cannabis market is expectedly much larger in the U.S. compared to Canada. Further, U.S. cannabis producers are benefiting from economies of scale and are racing towards profitability while Canadian companies are grappling with massive losses and rising inventory levels.

Today I’ll analyze two such cannabis producers, Sundial (SNDL - Get Rating) and Green Thumb (GTBIF - Get Rating), to see which is a better stock right now.

Sundial stock is down 94% from record highs

Sundial stock went public on the NYSE in the second half of 2019. Since August 2019, SNDL stock has lost 94% in market value and has burnt massive investor wealth in the process. In the first quarter of 2021, Sundial’s cannabis sales were down over 30% year over year. It reported a gross loss, making investors nervous.

Sundial sales fell from $75.8 million in 2019 to $61 million in 2020. In the last 12-month period, total revenue stands at $56.8 million. Now, in order to improve the bottom line, Sundial is looking to reduce its product portfolio and focus on high-margin items.

Further, to improve its liquidity position, Sundial has raised equity capital multiple times in the last two years. Its total outstanding shares have more than doubled year to date to 1.86 billion valuing the stock at a market cap of $1.48 billion.

Its shareholder dilution has been staggering but this has also allowed Sundial to end Q1 with a cash balance of $753 million with no debt. Sundial sales are forecast to fall by 10.6% to $45.15 million in 2021 and then rise by 55% to $70.2 million in 2022.

Green Thumb stock is up 262% in the last three years

Green Thumb Industries is one of the largest cannabis companies in the world and is valued at a market cap of $6.55 billion. This marijuana heavyweight has managed to increase its sales from $62.49 million in 2018 to $556.57 million in 2020. Analysts expect sales to touch $875 million this year and $1.16 billion in 2022.

We can see Green Thumb stock is valued at a forward price to 2022 sales multiple of 5.64x which is very reasonable given its growth forecasts. Green Thumb’s adjusted earnings are also estimated to rise from $0.07 in 2020 to $0.68 in 2022.

Green Thumb has returned 262% to shareholders in the last three years, easily crushing the broader market. But it’s also down 21% from its 52-week high allowing investors to buy the dip. The stock is trading at a discount of 62% compared to consensus price target estimates.

In 2020, Green Thumb increased sales by 157%, and in Q1 of 2021, revenue was up close to 90% at $194 million. This stellar growth allowed Green Thumb to report its third consecutive quarter of adjusted net income.

The verdict

It’s quite easy to pick a winner between these two stocks.  Green Thumb is the superior cannabis stock poised to derive multifold gains for long-term investors.  I believe you should avoid Sundial, as it has continued to dilute its shares and its sales continue to fall.

SNDL shares were trading at $0.80 per share on Monday afternoon, up $0.01 (+0.74%). Year-to-date, SNDL has gained 68.95%, versus a 18.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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