NewAge Inc (fka NBEVQ) (NBEVQ)

[NewJerichoMan]

BAI, P/S Ratios, and our Peers

Bai Brands just sold for $1.7B smackaroos.

Trailing Twelve Months (TTM) Revenue =~ $125M, while losing ~$10M per annum.
Projected / Future Twelve Months (FTM) Revenues = $425M

TTM Price-to-Sales Ratio = 13.6:1.00
FTM Price-to-Sales Ratio = 4.0:1.00

Bai is a leader in an emerging category and has more than proven it can scale with the right infrastructure, leadership, and capital backing; thus, it has earned its premium. Plus, Dr. Pepper really needed them.

Let's compare that with the current Market Caps of NBEV and some of its peers.

The TTM revenues are based off of Yahoo reported figures (not shown in grid).

The FTM revenue figures (future twelve months) are arrived at by taking the latest quarter's results and multiplying by 4. Then, the historical CAGR growth rate (2013 thru 2015) is applied. Example, if a company did $10M in Q3 that was multiplied by 4, equalling $40M, and if they had a 10% CAGR from 2013 through 2015, that was applied ($40M * 110% = $44M).

For NBEV, I took the current projected revenue run-rate ($70M) and applied a 10% discount to arrive at a net revenues figure ($63M). Below depicts the results:



NBEV won't be profitable in 2016, not per GAAP. Over the next 12 months, we should be. We've only just eclipsed the laggards and it took a 100% run over a 15-day trading period. Hallelujah!

JSDA is stagnant, no top line growth, and is basically breaking even from a shareholders' point-of-view. Nothing exciting here.

LTEA is something else. It has a $33M market cap based on less than $4M in revenues over the prior twelve months. And, they are losing money hand-over-fist. They are based out of Long Island (my backyard) and obviously have some deep-pocketed and patient investors who aren't selling. It's an example of what controlling the supply of shares can do for a stock. I've shorted a couple of times (nominal success each time) but the stock price isn't gonna drop if there is no one selling; no matter how bad the fundamentals are.

REED is the laggard of our group now. Pretty bad company and pretty bad stock. A few months ago, it was below $2.50 per share and rallied over 4. I was long from $2.50 to $2.60. It didn't move on earnings so I sold. After that, of course, it took off. This whole sector is pretty hot and REED is its "red-headed step child".

CELH is growing faster than the entire group. They are well-capitalized and trying to grow as fast as they can. They are doing so at the expense of the bottom line. The goal is growth, not profit. If they hit the revenue projection I have forecast, they will be profitable because of healthy operating margins. I have a few thousand shares of this stock but not enough to keep me interested. Well-run company with a strong group of insiders. If it maintains its growth rate, it's more than deserving of its 3 P/S ratio based on FTM revenues, and may be slightly under-valued.

FIZZ sells La Croix, which should be renamed La Crap, and it is its most successful product. It's basically trumped up water with some flavorings. Another example of what a tightly-held stock can do despite the fundamentals of the company. There have been a "hit piece" written about this company, the CEO, the holding company, the suspiciously high operating margin, etc. I don't think it's a good stock to short because if the owner ain't selling, the share price ain't dropping. This stock, like its La Crap beverage, is radioactive, for both longs and shorts.

MNST is over-valued in my opinion. It's growth is slowing and its huge margins can't improve anymore can they? But that doesn't change the fact that Coke is gonna buy it. And when Trump forces US companies to repatriate overseas monies, it might happen sooner than later. If BAI is worth 4x FTM revenues then Monster is gonna set the market price and Coke will pay it.

SUMMARY - So where should NBEV's value fall based on the foregoing? I'm gonna stick with my original $100M estimate for now, which equates to a P/S ratio (FTM) of ~1.6:1.00, or a stock price of $4.56.

There is seemingly no middle ground. Either a stock is bumping up against its 52-week high on a fairly regular basis or it's completely dogging it. My estimate puts us above the "Have Nots" but still a significant ways from the "Haves".

I'm a strong believer in this company and where it's going but I think that's an appropriate valuation for now: lower-middle class, if you will.

We've only seen one quarter's worth of performance. It takes time to cross over from the "Have Nots" to the "Haves" side of the field. After we get 2 quarters worth of performance, and see the fully audited 10K, the stock price will adjust accordingly. It has done so after the Q3 results in splendid fashion.