Replies to post #697 on Story Stock Station (STORY)

[MikeDDKing]

Please add VBDG as another pick. VBDG last traded at $0.74 and I think has excellent chances for a multibagger over the next year. To be very conservative, I'll set my one year target at $1.48 but I fully expect to see even better numbers. Here is my DD:

Background
Vertical Branding, Inc. is a consumer products, branding, marketing, and distribution company. The Company takes an integrated vertical marketing approach to brand building utilizing a variety of media channels, including television, online media, and print advertising. The Company also has established retail, catalog, and international product distribution channels to drive consumer sales. The Company’s focus is on finding appealing and high quality products that meet a real need in the marketplace with emphasis on the beauty, personal care, and house ware product categories.

Company uses transactional marketing to generate a retail demand and claims 3-5x the number of units sold on TV will be sold retail. Currently distribute through over 30,000 retail doors with names such as Walmart, Target, Kohls, Rite Aid, CVS, Walgreen, Linens n Things, and Home Depot.

Major Products
Hercules Hook >> Company's Cash Cow >> http://www.herculeshook.com/?page=inthenews
Holds, hangs and secures them all! No hammers, nails or drills! Holds up to 150 lbs!


Zorbeez >> Newest product >>http://www.asseenontv.com/prod-pages/zorbeez402.html
Zorbeez has the power to absorb up to 27 times greater than paper towels or any cotton cloth.


Starmaker >> http://www.starmakerproducts.com
StarMaker believes that YOU are as important as any celebrity. StarMaker offers consumers only the finest products from Hollywood, real working products used daily by the highest profile celebrities on Hollywood sets.

Hollywood Hands    Micro Pearl   Micro Pearl    Micro Pearl     Satinee       Dry Touch      Pearls of 
                     Abrasion        Mist           Body                      Hands & Feet      Youth

From PR >> http://tinyurl.com/2akla2

* More than 6,200 CVS pharmacy stores will carry the line beginning in August of 2007.
* CVS will carry three proprietary lines to include Micropearl Resurfacing(TM), Hollywood Hands(TM), and the popular Pearl Moisturizing, Anti Wrinkle Mist(TM).
* The partners project that expected combined total retail sales will average $10-15 million.
* Starmaker is the number one skin care line being sold at CVS.

Investment Thesis
1. Strong domestic growth
VBDG grew from $8.1M in revenue in 2005 to $23.1M of revenue in 2006. YTD in 2007 their revenue has grown 73% and net income has gone from a loss of $2.7M to positive income of $426K. Also, they have had three consecutive profitable quarters.

2. Expanding into international markets
They are expanding into international markets. They expect this expansion to double sales in 12 months. Revenue for international sales is expected to start in Q4. The following PR shows the first step in this process. Zorbeez is going to be sold in 40 countries. http://biz.yahoo.com/bw/070827/20070827005195.html?.v=1

3. New product introductions
- Zorbeez was introduced in March 2007.
- Two new products are to be introduced in the remainder of 2007. These new products are Hot Legs and Wardrobe Wonders. A link for Wardrobe Wonders is as follows: http://www.wardrobewonders.com . Also, they plan to introduce four to six new products in 2008.
- They have 11 new products in development including 3 line extensions to Zorbeez.

4. Entering seasonally strong quarters
There is seasonality in their business. Q4 and Q1 are their seasonally stronger quarters. The second quarter is the weakest quarter and Q3 is stronger than Q2. Consequently, we should see some impressive earnings for those quarters.

5. They are reducing costs by bringing a call center in house. This will reduce costs from $1.50/call to $0.17/call (discussed @ RedChip).

6. Earnings expectations
VBDG is experiencing some phenominal growth. Reasonable estimates for future earnings are:

Q3 EPS - $0.033 - 0.053 (midpoint assumes an earnings increase similar to the past 3 quarters)
Q4 EPS - $0.05 - $0.09 (midpoint assumes an earnings increase similar to the past 3 quarters)
2007 EPS - $0.10 - $0.16
2008 EPS - $0.30 - $0.40 (midpoint assumes 80% revenue growth)

Pick any reasonable PE based upon these numbers and you have quite an undervalued stock!

7. RedChip has a $1.70 12 month price target for VBDG (issued August 29, 2007).

8. Impressive management backgrounds
The CEO and president have impressive backgrounds and have held high level positions at companies such as the Home Shopping Network, Ticketmaster, Ronco, and Pep Boys. See the bios in the following company profile for more information. http://www.runonideas.com/files/clients/VBDG/vbdgProfile.pdf

Due Dilligence Resources
1. Second quarter report dated 8/14/2007
* Vertical Branding, Inc. Announces Third Consecutive Profitable Quarter
* Second-Quarter 2007 Results Include EBITDA of Approximately $853,000 and EBITDA Totaling Approximately $2.2 Million for the Six-Month Period Ended
http://www.secinfo.com/d19aNn.u1gt.d.htm

2. Redchip/Aurelius Consulting Group company profile
http://www.runonideas.com/files/clients/VBDG/vbdgProfile.pdf

3. RedChip Smallcap Investment Conference presentation from August 2007
http://tinyurl.com/2tkw77

4. VBDG transcript from 2/12/07 >> good source for quotes
http://seekingalpha.com/article/27309-vertical-branding-red-chip-conference-presentation-transcript

Charts


Mike