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Better Marijuana Stock: Origin House vs. MariMed

Keith Speights, The Motley Fool

Origin House (NASDAQOTH: ORHOF) and MariMed (NASDAQOTH: MRMD) rank as two of the hottest marijuana stocks on the market. Over the last 12 months, both stocks have come close to tripling.

So far in 2019, Origin House has emerged as the bigger winner by far. But which of these stocks is the better pick now? Here's how Origin House and MariMed stack up against each other.

A pile of marijuana leaves with one marijuana leaf prominently centered on the top of the pile.

Image source: Getty Images.

The case for Origin House

Origin House has a saying: "Win California, win the world." That's actually not a bad strategy for a marijuana business.

California claims the largest legal marijuana market in the world. In addition, the state is a trendsetter. What happens in California doesn't tend to stay in California.

So far, Origin House appears to be winning California. The company is the largest distributor of cannabis products in the state, reaching roughly 70% of California's retail dispensaries. Origin House currently distributes over 50 cannabis brands. This figure includes a growing number of the company's own brands.

California by itself presents a tremendous growth opportunity for Origin House. Legal marijuana sales in the state are expected to increase by nearly 40% in 2019 as more dispensaries open. California's legislature could help boost sales, with bills under consideration to reduce cannabis excise taxes and suspend the cultivation tax until 2022.

Over the longer run, though, Origin House hopes to replicate its success in California in other markets -- the "win the world" part of its strategy. Winning the world is likely to start in the company's home country, Canada.

Origin House completed its acquisition of Canadian vape retailer 180 Smoke last month. 180 Smoke currently operates 23 vape retail outlets, with more on the way. It also has permits for developing two new cannabis stores in Alberta under the "360 Cannabis" brand. Origin House thinks that it can leverage 180 Smoke's success in vaping to bring its own cannabis brands into the Canadian recreational marijuana market.

The case for MariMed

MariMed became one of the best-performing marijuana stocks of 2018 by focusing on providing consulting services to the U.S. cannabis industry. In particular, the company provided advisory services related to designing, developing, funding, and operating medical cannabis cultivation and production facilities and retail dispensaries.

Now, however, MariMed isn't just consulting. The company began gobbling up its own customers several months ago to move into cannabis operations itself. It has operations in six states but is seeking to expand into more.

MariMed owns New Jersey-based cannabis consulting company BSC Group and is considering New Jersey as a potential new market. The state already allows the legal use of medical cannabis and its state legislature recently delayed a vote to legalize recreational marijuana.

As more states legalize medical and/or recreational marijuana, MariMed could have even more expansion opportunities. But the company doesn't have to wait on moving into one legal market: hemp.

The U.S. legalized hemp in December 2018. MariMed had already made its move into the U.S. hemp market by investing in hemp-based cannabidiol (CBD) company GenCanna a month earlier. The company followed up in January by creating MariMed Hemp as a subsidiary that will exclusively focus on hemp CBD products.

Cannabis market research company Brightfield Group projects that the U.S. hemp CBD market could soar to $22 billion by 2022. That's much more optimistic than other estimates, but it seems likely that MariMed will compete in a multibillion-dollar U.S. hemp CBD industry.

Better marijuana stock

Both of these fast-growing marijuana businesses have tremendous opportunities ahead of them. However, I think that Origin House gets the nod as the better pick right now.

For one thing, Origin House's market cap is well below MariMed's despite having nearly twice as much revenue in the last reported quarter. I think that Origin House will deliver strong growth as the recreational marijuana market in California matures and as the company rolls out more of its own brands.

Investors should keep in mind that there are plenty of risks for both of these stocks, though. Neither Origin House nor MariMed is consistently profitable yet. Marijuana also remains illegal at the federal level in the U.S. But I remain optimistic about Origin House's long-term prospects and think the stock could really skyrocket if progress is made toward changing U.S. marijuana laws.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Origin House. The Motley Fool has a disclosure policy.