Muscle Pharm Corporation (MSLPQ)

[Odessa99]

Additional analysis: Along the lines with what I had posted below, if Muscle Pharm can manage to grow sales at a 200% pace for 2012 and again for 2013 (which may be obtainable since they grew sales 300% from 2009-2010 and will likely end up with a sales growth rate of 400% from 2010-2011), annual sales will be an astonishing $180 million in 2013. With gross margins at 34% (which is the gross margin percentage for both Q1 and Q2), there would be no less than $61 million available in 2013 after product costs to contribute to salaries, facilities costs, marketing, advertising, sponsorships, interest expense, etc. Should they manage to net $18 million from that potential $180 million gross sales, and given their stellar sales growth rate history, a fair value (market cap) on wall street might be in the neighborhood of $450 million. That would be based upon a P/E multiple of 25 ($18*25=$450) and P/S of 2.5, which would be rather conservative based upon their multi-year sales growth rate. Even if dilution continued at a feverish pace, and the outstanding share count skyrocketed to 2 billion, MSLP shares would be over 22 cents. Since operating losses have already begun to narrow (mentioned specifically in the PR that announced preliminary Q3 results), dilution should now begin to slow down. If dilution ended at the 1 billion share mark, MSLP would be a 45 cent stock, based upon my analysis above.

Muscle Pharm's sales: Past, Present, and Future
Here are the actual figures. Muscle Pharm's reported quarterly sales were as follows:
Q1 $3.5 million
Q2 $3.8 million
Q3 $5.7 million (preliminary results announced in a PR)

Based upon a $20 million estimate for all of 2011 (stated by a Muscle Pharm rep on MP's facebook page after someone posted part of my original message there), about $7 million sales would be expected for Q4, which would be the highest quarterly sales by far for any single quarter. If the sales level for Q4 turns out to be $7 million, that would be a sequential quarterly sales growth of 23% and a growth in sales of nearly 700% over the prior year Q4 ($7 million compared to $910k). Based upon how fast Muscle Pharm's sales have been growing over the past couple of years, here is what we may be in store for in the future.

2009 $1 million (Actual historical)
2010 $4 million (Actual historical)
2011 $20 million (Actual Q1+ Actual Q2 + preliminary Q3 + est Q4)
2012 $60 million (Projection based upon a reduced annual growth rate of 200%*)
2013 $180 million (Projection based upon a reduced annual growth rate of 200%*)

*The historical rate for sales has been 300% growth (resulting in a quadruple) for each of the past couple of years. Since that extreme growth rate may not be sustainable, I have used an implied 200% growth rate above for the next couple of years (2012 and 2013). If Muscle Pharm were to grow to $180 million in sales by 2013, they would be operating at the same scale as Optimum Nutrition was when it was acquired for $315 million by Glanbia in 2008. While this may be overly optimistic, there's at least a small chance that the sales levels I've computed above could be reached. After all, who would have expected annual sales to grow 300% from 2009 to 2010 and then to grow 400% from 2010 to 2011. Is an annual sales growth rate of 200% for each of the next two years really that unrealistic? In the US alone, the supplement business is reportedly a $25 billion market. Muscle Pharm products are not only sold domestically in the US, they are also sold internationally.