Less than four years ago, the market caps of Canopy Growth (NYSE: CGC) and Aphria (NYSE: APHA) were relatively close. By the end of 2016, though, Canopy was nearly twice the size of Aphria. Today, Canopy's market cap is 8.6 times that of Aphria.

Obviously, investors liked the decisions made by Canopy Growth over the last few years a lot more than they liked the decisions made by Aphria. But which of these top Canadian marijuana stocks is the better pick now?

Marijuana leaf on top of U.S. cash More

Image source: Getty Images.

Same opportunities

Sometimes when comparing two stocks, one has a clear advantage in terms of opportunities. That's really not the case with Canopy Growth and Aphria. Both companies pretty much have the same opportunities before them. And those opportunities are significant.

Since both Canopy and Aphria are based in Canada, let's start with the country's medical and recreational marijuana markets. Arcview Market Research and BDS Analytics project legal cannabis sales in Canada will total $2.7 billion this year and grow to $5.5 billion by 2022.

Thirty other countries have also legalized marijuana, two of which have legalized recreational marijuana with the rest legalizing only medical marijuana. Most of these countries also present opportunities for both Canopy Growth and Aphria. Germany currently claims the biggest marijuana market outside of North America and is arguably the most important overseas target.

Neither Canopy nor Aphria can enter the U.S. marijuana market right now. They can't retain their listings on the New York Stock Exchange and Toronto Stock Exchange and operate in the U.S. marijuana industry as long as marijuana remains illegal at the federal level.

However, the U.S. recently legalized hemp, which by definition is cannabis that contains low levels of psychoactive compound THC. Because hemp isn't illegal at the federal level in the U.S., it means that Canopy and Aphria can compete in the U.S. hemp market. The opportunity is a big one: Market research company Brightfield Group projects hemp-based cannabidiol (CBD) sales in the U.S. of $22 billion by 2022.

There are also opportunities for Canopy and Aphria to disrupt other markets. In particular, Canopy Growth CEO Bruce Linton thinks that cannabis products could make inroads into the multibillion-dollar beverages, opioids, sleep-aid drugs, and veterinary products markets.

Differentiating factors

But while Canopy and Aphria share the same opportunities, the two marijuana producers don't have the same capabilities. One key differentiating factor is production capacity.

Canopy Growth claims over 4.3 million square feet of licensed growing space in Canada. The company plans to increase its growing space to 5.6 million square feet. Although Canopy doesn't provide its projected production capacity in terms of kilograms per year, its space probably translates to an annual production capacity of at least 500,000 kilograms. By comparison, Aphria expects to have an annual production capacity of 255,000 kilograms when its current growing space is fully operational.

Aphria probably has an advantage in cost per gram to produce dried cannabis, though. The statement is tentative, however, for a couple of reasons. First, Aphria's costs are increasing. Second, Canopy doesn't report its cost per gram for producing cannabis anymore. Still, it's likely that Aphria's cost advantage is still in place.

Story continues