The cannabis industry took off with explosive gains in 2018, and even a late-year slump wasn't enough to dampen enthusiasm in marijuana stocks. Among the relatively few stocks that trade directly on major stock exchanges in the U.S., Aphria (NYSE:APHA) and Canopy Growth (NYSE:CGC) have emerged as potentially large players in the cannabis space.

When it comes to investing, it's important to have a framework for evaluating stocks that works for companies in different industries. Even with the specific challenges that face companies in the marijuana sector, it's still smart to look at some key indicators of future success. Let's do that to see whether Aphria or Canopy looks like a better buy right now.

Valuation and stock performance

Choosing marijuana stocks on the basis of valuation is challenging right now, because the fast-growing players in this up-and-coming space are still plowing all available money back into business expansion. You won't find profits on which to base a price-to-earnings ratio.

Looking at sales can give a hint as to relative valuations, though. Canopy trades at a premium valuation of more than 100 times its revenue over the past 12 months, which is truly staggering regardless of the growth potential in cannabis. Aphria reports about half the sales that Canopy does, but its market capitalization is much smaller, resulting in a price-to-sales ratio of about 45. That gives Aphria the nominal nod, but both stocks are extremely pricey by this metric.

From a stock-price perspective, Canopy has done far better than Aphria, with the former seeing its stock gain 18% over the past year compared to Aphria's 59% drop since January 2018. Yet both stocks have seen big declines in just the past three months, following the overall industry's downward trend in the aftermath of Canada's legalization of recreational cannabis.

Partnerships

One of the most essential strategies for up-and-coming companies in the cannabis industry is finding a partner that can help grow their business. Canopy Growth has been the role model that many other marijuana growers have tried to emulate, with the company's massive $4 billion investment from spirits giant Constellation Brands (NYSE:STZ) having opened the door to global distribution capabilities as well as the opportunity to combine forces with marketing, governance, and financing.

So far, Aphria has missed the boat on major partnerships, instead choosing to make acquisitions of its own to try to grow while staying independent. That's been a controversial strategy, especially in light of allegations that conflicts of interest have led to poor decisions from Aphria management. Aphria is large enough to draw the attention of several major players in the consumer goods space, but instead, it's currently weighing a possible buyout from a company that's even smaller than it is. For now, Canopy has the advantage of a deep-pocketed partner with clear incentives to help the cannabis business succeed.

Growth prospects and risks

At this point, both Canopy Growth and Aphria have plenty of potential, but success is far from a sure thing. For Canopy, the combination of Constellation's support, the popularity of its Tweed brand, and big expansion in production capacity should give the cannabis company an edge over much of its competition. As the Canadian retail market for recreational marijuana matures, Canopy should share in the ramp-up in demand, and efforts to expand globally are also showing early signs of promise. With aspirations to get the company involved in everything from cannabis-infused beverages to treatments for sleep disorders, pain relief, and even veterinary products, Canopy CEO Bruce Linton has plenty of ambition -- and has the backing to pursue all his goals.

Meanwhile, Aphria finds itself embroiled in controversy right now. The company got a buyout bid from Green Growth Brands, but it's contingent on a number of conditions that raise some red flags. Short-sellers have noted that some of the people involved with Green Growth and its recent merger partner, Xanthic Biopharma, also have relationships with Aphria. It seems odd that a company listed on the New York Stock Exchange is seriously weighing a purchase offer from a buyer that's listed only on a Canadian stock market -- and that lacks the sort of strategic value a company like Constellation gives to Canopy. That by itself raises the risk factor precipitously.

Even at a higher valuation, Canopy Growth looks like a better marijuana stock buy compared to Aphria. With too many questions about what's going on with it strategically, Aphria needs to find greater certainty about its future before investors can feel comfortable predicting where it's likely to end up.