It is not uncommon for publicly traded companies to sacrifice bottom line earnings while focusing more on growing their top-line sales (at least, in the early years). Some have brought up Muscle Pharm's lack of profitability, which is a fair point. Especially in light of the fact that the very recent 10-Q restatement has reversed MP's formerly profitable Q2 '14 into a net loss.
While sustainable profitability is an important, long-term measure of a successful enterprise, it is not as important during the early years, when more focus might be placed on sales growth.
Here are just a few (within various industries) of the many companies near a billion dollar valuation (+/- 30%) that have also (just as Muscle Pahrm) booked a net loss for a series of quarters while growing their sales.
AMAG:NASDAQ - booked losses 4 of the past 5 quarters. Sales of around $90 million for the past 12 months. Current market cap of about $720 million.
ACTG:NASDAQ - booked losses 5 of the past 5 quaters. Sales of around $114 million for the past 12 months. Current market cap of around $900 million.
EPAY:NASDAQ - booked losses 4 of the past 4 quarters. Sales of around $300 million for the past 12 months. Current market cap of around $1 billion.
CSII:NASDAQ - booked losses 5 of the past 5 quarters. Sales of around $148 million for the past 12 months. Current market cap of around $960 million.
ELGX:NADAQ - booked losses 3 of the past 4 quarters. Sales of around $140 million for the past 12 months. Current market cap of around $750 million.
LDRH :NASDAQ - booked losses 5 of the past 5 quarters. Sales of around $125 million for the past 12 months. Current market cap of around $890 million.
What each of the above companies has in common with Muscle Pharm is that they have experienced a series of quarterly losses while growing their top-line sales. And in most instances, Wall Street has rewarded their sales growth effort with a relatively high price/sales multiples.
With continued sales growth, I expect that the investment community will assign an ever increasing sales multiple to Muscle Pharm (for market cap valuation purposes).
As always, simply my opinion.
MSLP
