These 2 Canadian Pot Stocks Are Soaring!

Canadian weed still has upside to offer, with HEXO Corp. (TSX:HEXO) rocketing in the last five days, along with one of its competitors.

| More on:

Watching the share prices of legal Canadian marijuana has become something of a pastime in its own right, with every new development in the weed stock space making waves that are interesting to watch – interesting if you’re not invested, that is. If you are, it’s downright nerve-wracking. Shareholders still sticking their necks out for upside have been riding a pretty wild train these last few months, to say the least.

The following two stocks have seen considerably high gains over the last five days at the time of writing, thereby exceeding the movement experienced by some of their peers. While some commentators seem to agree that the pot bubble pretty much burst with legalization, the type of gains that the following stocks are continuing to enjoy make it seem as though the legal marijuana boom is still rumbling.

HEXO (TSX:HEXO)

Pot stocks aren’t really the place to start looking for strong track records – at least not yet. Still, it can be instructive to take a look through the data anyway, especially for weed stocks that operate in the healthcare space. HEXO’s one-year past earnings contraction by 146.2%, compared to Canadian pharma’s growth by 72% for the same period, is interesting to see; it also trails its own five-year average past earnings contraction of 68.2%.

While this is a seemingly healthy stock with no debt, there has been somewhat more insider selling than buying of HEXO shares in the last six months, while decidedly dodgy valuation is illustrated by three key metrics: a negative P/E ratio, a high P/B of 3.1 times book, and a share price that’s overvalued today by almost three times the future cash flow value.

However, two things make this stock remarkable: a 54.1% expected annual growth in earnings, which is suitably high for the TSX index, and the momentum-investor friendly gains of 35.24% that have stacked up in the last five days at the time of writing. With a beta of 2.21 relative to the pharmaceuticals industry indicating high volatility, this is one to ride for the upside.

Mean, green, and surprisingly lean

If you are looking for attractively valued pot stocks on the TSX, you’ve probably come to the wrong industry. However, some marijuana stocks are definitely better valued than others. Consider VIVO Cannabis (TSXV:VIVO), which is actually trading at a discount.

This cannabis stock gained 22.54% in the last five days at the time of writing with some pretty good valuation in terms of assets and a low P/B ratio of 1.1 times book. Though it’s seen a one-year past earnings shrinkage by 30.9%, analysts are expecting 101.7% annual growth in earnings over the next one to three years. With a share price discounted by 50% compared to future cash flow value, VIVO Cannabis is one of the most down-to-earth pot stocks on the TSX.

The bottom line

Anyone looking to make money with Canadian pot stocks should sit up and take notice of the gains the two tickers listed above have enjoyed in the last five days. While investing in Canada has traditionally stuck to the tried and tested roll call of bankers, utilities, miners, and oil companies, the green revolution may well stand the test of time if stocks like VIVO Cannabis and HEXO continue to reward shareholders with the promise of capital gains.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Stocks for Beginners

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

2 Top TSX Growth Stocks to Stash in a TFSA for Life

These two growth stocks may not be the top in the last month, but in the last few years, they…

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »

A worker uses a double monitor computer screen in an office.
Stocks for Beginners

Why I’d Buy Fairfax Financial Stock Even at Today’s Prices

Fairfax stock just keeps edging higher. But is it now too expensive, or can investors just look forward to even…

Read more »