Cannabis stocks are benefitting from a resurgence of interest as it becomes increasingly likely that it will be rescheduled legally. Less stringent legal codes will open up new opportunities, especially tax benefits, to cannabis companies. The loosening of regulations promises to raise all ships, so to speak. However, it will remain wise to avoid those cannabis firms that have fared poorly over the past few years.

Cannabis firms have not lived up to their promise overall. Steep losses and a lack of profitability have marred the sector. That has prompted a focus on cost-cutting efforts and efficiency of late. Those factors are still the main parameters by which to judge cannabis investments, even as marijuana moves from a Schedule I drug to a Schedule III drug.

Green Thumb Industries (GTBIF)

Green Thumb Industries (OTCMKTS:GTBIF) has been and will continue to be a worthwhile stock to purchase in the cannabis sector. The company is among the rare few in the sector that has managed to create a profitable business model for itself.

Green Thumb Industries creates income. Investors familiar with the sector know that simply hasn’t happened for the vast majority of cannabis firms. That’s why the company remains a breath of fresh air. It is well-operated in an industry that is particularly difficult to operate within profitably.

Green Thumb Industries produced $13 million in net income from $252 million in revenues during the most recent quarter. Revenues are flat on both a sequential and year-over-year basis. Further, net income is decreasing because the company faces high operating costs.

While that may sound negative, there’s a lot to celebrate. No other weed firms come close to operating as efficiently as it. That should bolster investor confidence that the company will continue to grow reasonably and ultimately create a larger scale but also well-run firm.

Tilray (TLRY)

Tilray (NASDAQ:TLRY) has been, perhaps, the biggest disappointment of all cannabis stocks over the last few years. The company has repeatedly shown investors that it simply throws massive amounts of capital at its problems in a way that destroys value. It is clearly headed in the wrong direction. Cannabis rescheduling will not change that.

Tilray lost tons and tons of money operating by itself. Management decided that scale was the answer to the issue. So, back in late 2020, the decision to buy Aphria was made. That purchase turned Tilray into the largest Cannabis firm globally. It simply didn’t work. Shareholders watched over the next few years as their investment’s value gradually slowed.

Management again moved to change the firm’s fortunes by buying Sweetwater Brewing in 2022. The move wasn’t particularly surprising: Weed firms see some crossover in customer base, so combining the vices under individual firms makes sense. Furthermore, alcohol is generally profitable and smooths the operational issues cannabis produces. The problem is that Tilray remains in deep trouble. The firm lost $1.443 billion ($130 million adj.) in its FY23 while only making $627 million in sales. It proves that sometimes, no amount of money is enough to fix a problem.

Cronos Group (CRON)

Cronos Group (NASDAQ:CRON) is listening. The message is clear: Investors are done shoveling their capital into loss-producing cannabis stocks. Ignore the message, and things will only get worse. Fortunately, Cronos Group is listening, and that’s the primary reason to invest in it.

Cannabis revenues are slipping overall across the sector. Cronos group has not been spared as its sales have contracted by 12% and 13%, respectively, in Q2 and H1 of 2023. Not great!

However, net losses are narrowing very quickly, so the company has a realistic chance to break even soon. That puts it in a category with similarly well-run firms like Green Thumb Industries and differentiates it from Tilray.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.