Natural Grocers By Vita Cottage (NGVC)

[investora2z]

NGVC has been a great story for investors so far. The momentum has increased after the recent results, the stock is almost double the offer price. While the returns have been great so far, perhaps time has come to start getting a little cautious. The current valuations of a forward P/E of 45 factor a lot of future positives already. The base effect will not let the sales / net income rise at the same pace forever. So the next earnings may be a good time to exercise extra caution. Even in the intervening period, it will be good to keep an exit point in mind. A correction in the market can trigger a correction in the stock as changed sentiments may lead to a lot of profit booking. Corrections in the market is overdue and almost imminent. Still, the markets have their own way of playing out and we may even see higher levels. So one should have a strategy based on the risk appetite. NGVC has to bring out innovative products to maintain the good growth and can look to diversify in other segments. Smaller companies like ChromaDex Corporation (CDXC) have recently launched innovative products which have prompted its insiders to increase stake in the company. The investors of Chromadex include the legendary Dr Frost (Frost Gamma Investments) and Barry Honig. NGVC also has to work on increasing the margins as the current net and operating margins may not be able to support future growth without increasing leverage. The current D/E ratio is 20 and further rise may not be very comforting for a company of this size. So it is a good idea to trail the success of the stock with a stop loss and hope that the great move continues. Time has come for a little bit of caution.