And now for something totally off topic, but this is too good not to pass on:
A play that is right at the inflection point: Galaxy Foods:
finance.yahoo.com
Food you say? Indeed, I don't care as long as it has the moonshot ingredients, and I've loaded up at this price.
GXY has 90% of the "alternative cheese" market. You will see their "Veggie" brand product in the produce section. Is it appealing food for mainstream animal eaters like me? Well, it's OK, except I'd rather eat a double cheeseburger, heavy on the melted pepperjack cheese. I put an onion and tomato on it and pretend it's healthy. But hey, when you hit the big 50 and start taking Lipitor, maybe it's about time to find ways of ingesting a little soy into the old diet. So it's not just for Vegans IMO.
The market cap is only about $55 million, add some net debt of $10 million for an EV of $65 million. This is an execution story, as orders have never been the problem for GXY: although order fulfillment has. It was so bad, that in August of last year only 50% of their orders were fulfilled. GXY has now corrected that failing, putting in place a state of the art $25 million plant capable of producing a billion bucks (versus about 45-50 million now) in various soy based products. They are now ramped up (for 95% fulfillment) to create terrific top line revenue growth and even greater big bottom line EBITDA pop. They have virtually no capex going forward. This is operating leverage nirvana, and off of a "no expectation" base. This is what the brokers and institutions pay through the nose for after the fact, when earnings growth visibility has the official good housekeeping seal of approval.
The founder of GXY Anthony Morini has brought in a new CEO, who was director of marketing at Tropicana. The goal is getting the supermarkets properly stocked AND expanding programs with Subway (remember their founder holds 20% of GXY), Sbarro and Pizza Hut. WMT is embarked on a major Florida test with 19 skus per store, and the expectation is it goes national once GXY shows they can deliver large orders. There is a drink being introduced with the Tropicana logo called Smoothie, that has been a big hit in Subway tests. It too will be expanded.
Now do the math: $100 million sales rate and growing by YE 2002, at $20 million EBITDA, and still growing at 30% (at least) into the foreseeable future. What should it sell for? 7 times EBITA is conservative, but just keep running that quarter by quarter. Go mid year 2003, off of a $135 million annual run rate, and a $30 million EBITDA. I'm saying 8x EBITDA (since we aren't in the bubble anymore, but could be higher)= $240 million MC, debt paid off/ by today's $65 million EV. Looks like a four bagger in a year plus to me.
Company conference call last quarter is a must for your due diligence. Hit videonewswire link:
biz.yahoo.com |
