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Unlike many cannabis-wannabes, who aren’t selling flower yet, Aphria is actively producing hydroponic cannabis with the help of the Canadian government and selling it for medical use. Aphria, as well as other cannabis companies with Canadian government partnerships, may be around for years to come. APHA’s shares rose nearly six-fold between 2016 and the beginning of 2019. Also, similar to Aurora (but unlike cannabis companies trading on the pink sheets), Aphria trades on the well-known and investor-trusted NYSE.

From this low point the stock reached a price of twenty cents per share two months later. That is a price increase of over 100 times, though the price also fell by more than 90% from this high to hover between one and two cents a share midway through 2021. This kind of price action is not for the faint of heart.

The difference between a concept and a company is that the company could find a way to justify its share price, usually through profits. A concept alone, on the other hand, will typically not be strong enough to justify share prices. In other words, the stocks are increasing because of the underlying idea of cannabis legalization. There is no specific value there, nor is there a reason for any specific penny stock to appreciate.

Aphria (NYSE: APHA)

Many people believe that cannabis is growing in popularity and it will become increasingly legal in the United States and elsewhere. However, investors should be cautious about assuming that companies in the industry will see their stock prices increase. Stock prices seldom correspond so neatly with broader societal trends.

In the nine months ending Sept. 30, 2019, CANN brought in just over $4.2 million in revenues. During that same time, CANN posted more than $12 million in operating costs. In other words, CANN operates at a loss of nearly $8 million. Even if they liquidated every single thing they owned—pens, paper, coffee cups, and everything else—they would still be worth less than some negative value.

The trading chart of Canopy Growth Corp. looks similar to the trading charts of the other cannabis-related companies in 2015 and 2016. Since then, the stock saw a nearly 30-fold increase going into the beginning of 2019, only to suffer a slowdown later in the year.

Investors—and cannabis enthusiasts looking to profit from legalization—have since looked for opportunities among penny stocks springing up in the industry. However, these investors would be wise to question the underlying business fundamentals of these companies. Being involved in a new industry alone isn’t enough to create compelling value for investors. To give you an idea just how dramatically overvalued recreational marijuana penny stocks have become, take a look under the hood; here are some of the top pot penny stocks that have been gobbled up by shareholders in the early years of legal cannabis.

These are the marijuana penny stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The price-to-sales ratio shows how much you’re paying for the stock for each dollar of sales generated.

Marijuana stocks, represented by the ETFMG Alternative Harvest ETF (MJ), have solidly outperformed the broader market. MJ has provided a total return of 61.1% over the past 12 months, ahead of the Russell 1000’s total return of 43.2%. Note that MJ targets a broad assortment of cannabis industry stocks, including penny stocks. These market performance numbers and all statistics in the tables below are as of July 2, 2021.

Here are the top three marijuana penny stocks with the best value, the fastest growth, and the most momentum.

Fastest-Growing Marijuana Penny Stocks

These are the marijuana penny stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue through organic or new ways, as well as find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.

Medical and recreational cannabis use has been legalized in a growing number of U.S. states and on a national level in Canada, fueling a burgeoning legal cannabis industry in recent years. Cannabis stocks are now a prime focus for investors seeking potentially explosive sales and stock growth. But there are certain considerations associated with marijuana stocks that investors should keep in mind.

To begin with, cannabis stocks face higher-than-normal risk and volatility due to a long list of factors. Many publicly traded cannabis companies are young, unproven enterprises that face a complicated, fast-changing market that includes different laws across many local, state and regional jurisdictions. Also, cannabis use is still illegal at the U.S. federal level. The challenges are particularly great for marijuana penny stocks, and investors should be especially cautious and perform more than their usual due diligence when investing in these companies. Some up-and-coming names in the marijuana penny stock category include High Tide Inc. (HITI.V) and Vireo Health International Inc. (VREOF).

These are the marijuana penny stocks that had the highest total return over the last 12 months.