3 Reasons to Buy Green Thumb Industries Like There's No Tomorrow

The rescheduling of cannabis from a Schedule I to a Schedule III drug by the U.S. Department of Justice on April 23 means that the sector's stocks will no longer move in tandem with political winds. More than ever, there are cannabis winners and losers, and Green Thumb Industries (OTC: GTBIF) is among the former.

The company is financially strong enough, with self-sustaining cash generation, to benefit from recent regulatory changes and weather any short-term shifts.

The legal U.S. cannabis market was expected to be $137.7 bilion in 2026 and is expected to grow to a $1.43 trillion market by 2034, a compound annual growth rate of 34%, according to a Fortune Business Insights report.

Green Thumb is that rare profitable cannabis company poised to benefit from the inevitable institutionalization of cannabis use in the U.S. Here are three reasons to buy Green Thumb Industries stock right now.

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1. Fewer taxes mean better margins

Moving to Schedule III removes the 280E federal tax burden for state-licensed medical marijuana operations. Operators can finally deduct standard corporate expenses, immediately expanding net margins.

It's been estimated that medical dispensaries that operate at typical margins could recapture 15 to 30 points of effective tax rate, a significant difference.

Green Thumb is already positioned to capture this upside. In its first-quarter earnings report, the company noted that it has filed applications for U.S. Drug Enforcement Administration registrations following the rescheduling.

In the first quarter, Green Thumb reported revenue of $300.2 million, up 7.4%, year over year, and earnings per share (EPS) of $0.07, up 75% over the same period a year ago. The company had $344.5 million in cash, up from $289.9 million, putting its balance sheet ahead of most competitors'. That gives Green Thumb the flexibility to take advantage of opportunities or fund capital expenditures without borrowing.

2. Unparalleled capital discipline in the sector

When cannabis valuations spiked years ago, some management teams used their equity to overpay for cultivation assets. Green Thumb, on the other hand, improved its operational efficiency in limited-license states and remained profitable.

Green Thumb's strong cash position allows it to continue repurchasing its shares, and it bought back $33.3 million in shares in the first quarter. For a company with a market cap of $1.8 billion, retiring that many shares is an incredibly bullish signal. It proves that founder and CEO Benjamin Kovler views Green Thumb equity as significantly undervalued. This aggressive stock buyback program reduces the overall share float, concentrates future EPS, and provides a structural floor for the stock price during broader market sell-offs.

3. Green Thumb is poised for a boon in adult-use sales

The rescheduling change applies only to medical-use dispensaries for now. However, on June 29, it is possible that at an administrative hearing, adult-use recreational marijuana will also be made a Schedule III drug. That will mean cannabis companies can also benefit from standard business deductions on their adult-use sales.

Green Thumb is well positioned for the transition because it can capitalize quickly when states approve adult-use sales. It has 110 dispensaries in 14 states.

In September, Minnesota launched its adult-use market. Green Thumb already had eight RISE dispensaries up and running, allowing these locations to instantly absorb the massive influx of recreational demand. The company is also increasing its footprint for upcoming adult-use transitions in major East Coast and Southern markets, such as Virginia, where it has seven dispensaries, Florida, where it has 22 dispensaries, and Pennsylvania, where it has 19 dispensaries.

James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Green Thumb Industries. The Motley Fool has a disclosure policy.