I brought some SLGD in the $1.14-$1.16 range This week. Here is what I like.
1) SLGD earned .06 Last quarter which is fantastic, especially considering the new agreement started 1/1/15 and I expected much less eps then that. SLGD has trailing earnings of .19, which means it is very cheap.
2) SLGD has strong balance sheet that features .51 a share in cash, so very cheap if you factor that in.
3) SLGD I would expect another .04-.07 versus a .03 comp in q2, which I think could put it up in the upper 1’s and low 2’s in my opinion.
The concern of SLGD, is this quarter sustainable? Although the answer to that is hard to answer, I think it is close to if not completely after further review. Their house hold products segment is growing significantly, furthermore the house hold products segment gross margins are improving significantly. Also q1 seems to be the low point of House Hold product sales, so I expect a seasonal uptick the rest of the way. The concern about the sales Skin and Hair care products, being stuffed because they are no longer selling into certain channels, although that may account for some sales. I also think people are ignoring the facts, in fact I was in the beginning as well. I think the other channel was pulled away from them, because they were not selling into that channel effectively. Also note that sales of their skin care about 40% of their sales last year were to WMT, and ULTA which is growing rapidly and so is SLGD sales to ULTA. These channels they continue to sell in, so I think they for the most part in my opinion, have been selling in the department stores, and salons rather than the other channels, hence most of the sales, I think will be fine, I also believe the higher Gross Margin Household product will have their uptick as they normally do. So overall I think we will see good results, although as I always say you never know with earnings.
Conclusion: I find SLGD to be a very attractive opportunity at these current levels, of course there is a risk here, but I think considering the balance sheet, the stock is worth the risk of a small position in my opinion. All is just my opinion, and I could always be wrong though.