Value Investing Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores |
- Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores
- Which websites do you use for your news updates?
- GNC: Cheap Stock, Innovative Company. (Fisher/Graham Analysis)
- Boring Businesses Part Deux: Greystone Logistics (GLGI)
- Question about net change in Working Capital
| Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores Posted: 03 Sep 2018 07:21 PM PDT |
| Which websites do you use for your news updates? Posted: 04 Sep 2018 02:14 AM PDT Hi All, I hope you dont mind this post on this sub. I thought that this would be the best sub to get great sources from. I'm building a habit of reading the business news each morning and would like to know what websites are your main sources? ATM, I interchange between the economist and finimze... economist because i want to stretch myself and i often find it difficult to understand some terms and finimize which is more for uni students where it basically breaks down the news to be really understandable and details the impact of that news. Sometimes i toss in Bloomberg and I'll read a random publication from one of the banks. Thank you! I look forward to hearing your responses :) [link] [comments]  |
| GNC: Cheap Stock, Innovative Company. (Fisher/Graham Analysis) Posted: 03 Sep 2018 12:12 PM PDT Research never really ends. I'm starting to dive into GNC's financials going back to 2012 to get a more clear picture of their operating history. I'm not a professional, I'm barely experienced, so don't take this as investment advice. I am long GNC, and I do plan on buying more. TL;DR, GNC is a retailer, producer, and innovator of health related consumables. The stock is very cheap on a free cash flow basis. The company has an above average chance at maintaining market share in a rapidly growing sector. I hope to learn more from you all. I would categorize GNC as having a speculative capital structure, and with the current Market Cap, it has an outsized potential for gain in share price. The bulk of it's EV is about $1b of debt. The company has generated over $150m of free cash flow over the last few years, and predicts $100m free cash flow for 2018. The market is awaiting a $300m equity investment to be approved by regulators, this will be used to pay down debt, leaving them with less than $700m of debt (which has been recently extended from 2019 to 2021). Why is the market wrong? I think there are non-investment factors affecting demand for the stock. 1. Retail apocalypse has pummeled nearly all physical retailers. 2. Negative EBIDTA and Earnings for 2 years in a row, due to non-cash write downs of intangibles & goodwill. 3. Operating margins are down about 50%, although this is a great reason to sell a stock, it's in oversold territory, if you believe operating margins can stabilize around here, cherry on top if they improve. If the company passes a significant number of Fisher's 15 points, then this stock has a great likelihood of very significant appreciation.
Yes. GNC is one of the market leaders in the dietary supplements market, expected to be worth $278.02 Billion By 2024, a 9%+ expected CAGR from today. They participate in this market as a physical and online retailer, private label seller, and a contract manufacturer.
Yes. GNC actively pursues new products by internal innovation as well as sourcing from other distributors. They may copy new products under proprietary brands to increase margins, but they also innovate new products internally that are not available in other places (such as the recent launch of Slimvance (although it only has sub-par ratings online).
The company spends about $6-$8m per year in R&D expenses, compared to over $2b per year in revenues. They aren't an R&D powerhouse, but have shown time and again that they are able to invent new products that the public consumes.
Definitely. Their physical retail presence is relatively ubiquitous in the US, and their eCommerce is growing very well. They have restarted their loyalty program and now have over 1m subscribers paying $40/year for extra benefits, this grew by 8% QOQ. Retail staff are motivated by sales goals that benefit the organization. There is competition from Amazon, but GNC has a robust presence on Amazon, and with their private label products, they are able to better control margins.
With gross margins compressed down to 33.6%, they have operating margins of about 8%. This is compared to higher margins over the last decade of about 36% gross and 15% operating. Interest expenses shave approximately 7% from the operating margins. So current earnings are not a highlight, but on an historical average basis the company is able to produce worthwhile margins.
The primary driver of higher margins is innovation in new products such as Slimvance, as well as catering to secular growth and new trends in the health goods marketplace. They are also optimizing their retail portfolio, with less than 2.5 years average lease term per location.
Glassdoor.com gives them a ⅗ star rating. Filtering for Current Full Time Employees, this increases to 3.2/5 and the CEO gets a 53% approval rating. Not excellent, and this could be a potential challenge in the company's success.
The company changed CEO in 2016, and got the former RiteAid CEO. Considering where RiteAid's operating history, it's hard for me to get excited about their executive leadership, some of whom are only with the company since 2015-2017, while others are around since 2009.
Not loving that the CEO came from outside the company. Historically, the company has looked to outsiders for making strategic changes in the business, including when it was a family owned business.
I think they are handling accounting controls well, I don't see any reason for doubt here. GNC Holdings Inc has a Beneish M-score of -2.35 suggests that the company is not a manipulator. At the same time, GNC has a Z-score of 1.79, indicating it is in Distress Zones. This implies bankruptcy possibility in the next two years. (source: Gurufocus.com).
GNC is a respected brand name in the supplement industry, they have more unique branded products than competitors like Vitamin Shoppe.
GNC certainly has a long range view of profits. They are undergoing changes to their business to modernize it for omnichannel sustainability, plus the new paying subscriber base is growing rapidly, which was started at the cost of closing down an older loyalty program.
The company has sufficient free cash flows to fund either business expansion or a return to shareholders.
I am satisfied with the company's conference calls, no extra comments here.
GNC has been in business for 80 years, their recent performance, while less than stellar, appears to be honest. Insiders had been buying substantial amounts of the stock through the end of 2017, I would like to have seen these continue through 2018. I do wonder why these have suddenly stopped (the last insider trade was at $5.80) [link] [comments]  |
| Boring Businesses Part Deux: Greystone Logistics (GLGI) Posted: 03 Sep 2018 08:21 AM PDT |
| Question about net change in Working Capital Posted: 03 Sep 2018 10:20 AM PDT Hi, I came across a couple of articles that referenced change in NWC / net income and change in NWC / sales (where NWC excludes non operating items such as cash) I understand that, standalone, a high positive change in NWC number is good for the company as it means it throws off cash. However : how useful are the ratios of NWC over NI and over Sales? What actionable info do we get out of these percentages? At what threshold do they start to become relevant? What if the ratios are negative? Apologies if the questions are not super smart. I am a bit confused by this seemingly easy concept that is WC... Thanks! [link] [comments]  |
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