2020 Analysis + 2021-2022 Financial Projections
After reviewing the annual report I thought I'd share my perspective - which of course includes the bias that I own shares but believe the last 5 months we have turned the corner and are heading to dollar land in the next 12-24 months.
2020 Q4 Recap
1. Revenue was $1.2M, up 27% vs PY Q4.
2. Gross Margin was 51% in Q4! This was up from 38% in Q2, and 43% in Q3. Note in 2018 and 2019 it was 42% and 33%, respectfully. If we can maintain near 50% GM % going forward that is a complete game changer. This is driven from pricing, likely lowering our input cost and of course new product introductions at higher price points.
3. S&A cost as a % of sales were 40%, this is DOWN from 46% in 2019. The last 2 quarters of 2020 they were 40% of sales - and as they moved through the new COVID world it seems they got lean and mean. Going forward as they continue to leverage their existing supply chain - they should leverage nicely and continue to keep that 40% or lower.
4. OI (before interest and taxes) was $129K. This was the 3rd straight quarter of operating profit - up to 11%.
Overall IMO - Q4 was the best financial performance by the company since I started following it back in 2018.
2021-2022 Forecast
Here is my opinion.
1. Assuming they can continue to grow in the 25% range on their CORE business (excluding Dissm and lawsuit infringements) the revenue would be $5.6M in 2021 and $7M in 2022. This seems really fair as a base case.
2. If GM% can stay in the 50%, and they can continue to leverage their fixed cost structure driving S&A cost down to 35-37% range then they will have $1.1M of income in 2022.
3.The 2 wild cards are DISSIM and Patent infringements. IMO based on the DISSIM reach in such a short period of time that $1.5 and $3.5M in sales for 2021 and 2022 is VERY reasonable. Look at Amazon, youTube, etc. They are selling this product internationally at will. The first batch of DISSIM lighters had some minor flaws which drove the stars down on customer reviews - but over the past 2-3 months the stars have been steadily rising (it now has 4.3 stars on amazon over past 3 months and up to 4.0 overall - this is after the slow start). The DISSIM lighter should be able to leverage nicely with minimal S&A cost adds - but let's assume $250K of cost adds by 2022 on the $3.5M of revenue. This scenario adds $1.5M of income in 2022 just from Dissim alone. Again, IMO this is the wild card and could easily blow up into 5-10x this.
4. If you take the $1.5M dissim in the conservative case above + the $1.1M from the core business - VPRB could so $2.6M in OI by 2022. With a 35 PE that puts valuation at $1.00
5. Clearly these are projections but they do not feel to pie in the sky. They EXCLUDE ANY BENEFIT FROM THE INFRINGEMENT LAWSUIT WHICH COULD BE MILLIONS IMO. Also, we all know 99% of penny stocks have HIGHER valuations on FAR FAR LESS. There is always the scenario where this starts to get more investor awareness and it trades $1, $2, $3 just because... Don't forget the CEO here took KRAVE brand public...and the COO Dan Hoff is as passionate and an industry guru. They both own millions of shares and take normal salaries from the business - so when we win they win.
Good luck to anyone investing here - clearly anything under $.20 IMO has SIGNIFICANT RISK/REWARD OPPORTUNITY.
