Wood, my views on the Quarter etc.
Not sure I'm going to add much at this point, but these are my thoughts:
1. Revenues were basically in-line, so not a reason to bid up the stock (in isolation). Expenses were above what I expected, but I thought they did a fair job in explaining the sources of variance. If they can hit the margin targets they've guided to for Q4, the stock should re-rate a lot higher.
2. Management is too vague when it comes to guidance. They need to give a range in dollars for both revenues and operating income. I've repeatedly mentioned this to them, but they keep sticking to guidance based on growth rates. That's not helping the stock in my view. Anshu said he didn't want to give specific guidance and miss, but setting guidance and beating it increases confidence.
3. Something has to be done about the share count, which is bloated. They are capital constrained, and have many growth opportunities, so a buyback doesn't make a lot of sense at this point in my view. As you and I know, a RS was contemplated back in 2016/2017. I think that should be revisited along with a more than proportionate reduction in the authorized share count (which was discussed on the call).
4. The french fry deal seems like a great acquisition, at least from a valuation perspective (buying it for 0.1x sales). The addition of that business along with BLF's ramp and the impact of the credit facility should result in revenues approaching my estimate of $6-$7mm in revenue for Q4.
As far as the stock price goes, I don't think the company will get a full valuation until it uplists. Most retail investors aren't going to do the valuation work, which unfortunately is complicated by management's unwillingness to give dollar ranges, to properly price the stock. I also think management should include a valuation slide in the presentation that gives a range of values based on comps and net income multiples. For a growth stock, they should use PEG ratios, which is what most growth managers would use to determine relative value. On that basis, I think it would be hard to argue that the stock isn't significantly undervalued.
