Both HEXO (NYSEMKT: HEXO) and CannTrust (NYSE: CTST) make strong cases for themselves as good investment opportunities with steady share price growth over the past several months. But which one is the better buy?
HEXO share prices have doubled in value from last year, and CannTrust remains on a good trajectory while continuing its push towards improving its production capacity.
HEXO has a 30 percent share of Quebec’s adult-use market. This was the result of Quebec, Canada’s second largest province, awarding a major supply agreement to the company last year. The move drastically improved its market share in this all-important province driving revenues way ahead of its 2018 numbers.
HEXO currently markets it products in eight of Canada’s 10 provinces or 95% of the country’s population. This is largely as a result of the company’s recent acquisition of Newstrike Brand, which enabled it to expand from its previous operations in Ontario, British Columbia, and Quebec.
This deal adds 470,000 square feet for its indoor marijuana production and will see it produce another 150,000 kilos of cannabis annually. However, this still pales in comparison to Canada’s major producers. In other moves, the company is also inking a deal with a Greek company which is building a facility that will serve as a transshipment point for its cannabis products to other European countries.
CannTrust currently has a rated production capacity of 50,000 kilograms of cannabis annually. However, with the completion of its phase 2 expansion in its Niagara Perpetual Harvest facility, production numbers are expected to skyrocket. This does not end here as the company is also in the works for another round of expansion late next year. This would increase production capacity by an additional 100,000 kilograms.
CannTrust, in a recent announcement, is also planning to increase its overall cannabis production by growing outdoors. This the company said will increase its cannabis production by about 100,000 to 200,000 kilograms annually.
The company is actively seeking new markets outside of Canada. Recent partnerships have made it possible for the company to distribute medical cannabis products in Denmark and Australia. Its push for bigger production numbers is an answer to growing international demand. With Canada home to some of the world’s largest producers, its market simply isn’t big enough to absorb this large infusion of cannabis products.
CannTrust versus HEXO – To Buy or Not to Buy
It’s no wonder why cannabis stocks continue to be a popular option for investors. These stocks have been the strongest performers over the last two years and with more markets opening both locally and internationally, it continues be an attractive investment opportunity.
Both CannTrust and HEXO are banking on increasing production capacity to drive their revenue numbers. But this can involve raising additional capital by offering more shares which in turn could drive the value of its share prices down through dilution. Of the two, HEXO has better growth potential since it’s starting with lower production numbers. On the other hand, CannTrust represents the safer option with a better track record.
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