The Canadian cannabis market is starting to take shape, and so far, a pyramid of sorts has formed. At the top of the pyramid reside Canopy Growth and Aurora Cannabis. The two juggernauts share about 50% of the domestic market and are numbers two and one (respectively) in production capacity.

Lower on the pyramid, Hexo, Cronos Group, and Aphria are battling each other, and Hexo recently got a boost with its acquisition of Newstrike Brands.

Despite this general pecking order being established, there is enough room for smaller cannabis companies to squeeze in at the bottom of the pyramid. Let’s look at a little-known small-cap pot stock you should know if you are interested in the Canadian pot market: OrganiGram Holdings  (TSXV:OGI).

Already profitable

Organigram’s current market cap sits at about $1.32 billion, which doesn’t come close to that of the industry’s top firms. But the company boasts a production capacity that — once ongoing projects end — will reach up to 113,000 kilograms a year. Note that Cronos’s production capacity is currently around 40,000 kilograms a year and is expected to soar to about 110,000 kilograms a year by next year.

Much like other pot companies, Organigram saw revenues soar during its latest quarter thanks to a lift on the ban of recreational marijuana use. Net sales for the first quarter of 2019 (which ended on November 30, 2018) increased to $12.4 million up from $2.4 million compared to the corresponding period of the previous fiscal year; this represents growth of 419%. The company’s gross margin percentage (excluding fair-value adjustments on biological assets) increased to 71% during the quarter, up from 25% year over year.

Perhaps the biggest story is the fact that, unlike many of its peers, Organigram is actually returning a net profit. The company posted a net income of $29.5 million during the quarter, up from a net loss of $1.2 million year over year. It is essential to note that pot became legal in Canada mid-Q1 2019 for Organigram. The full effects of these new laws, thus, will likely be felt in subsequent quarters. Organigram expects sales to double during Q2 2019.

Reasons to worry?

Of course, everything isn’t peachy for Organigram. The company has also had to rely (somewhat heavily) on bought-deal offerings to fund its growth, and its outstanding shares have ballooned recently. Further, Organigram does not have a very strong international presence and has yet to land a lucrative deal with a partner. In other words, despite making important strides in the industry, Organigram still has its flaws.

Investor takeaway

Organigram boasts a high production capacity (once it reaches its peak), growing sales and profits, and a low valuation by industry standards; the company currently trades at 23.58 times future earnings. Despite its shortcomings, Organigram definitely warrants more attention from investors.