Thanks for the writeup! Do you have any insights into their product velocity at the different retailers? I'm worried that their growth is mainly driven by stocking orders, since they're opening so many new locations. Now they need the products to perform well and sell through to get reorders, which I feel like we have no visibility into. Thoughts?
I can't definitively rule out that this might be the case, but both the CFO and the TRUBAR CEO stated in the last two calls, as well as in the Q3 2023 call, that they are performing very well at Costco locations, where they started in 2018. Costco has a hurdle rate of $1,000 in average sales per bar, and TRUBAR consistently exceeds this rate. This suggests strong performance; otherwise, additional Costco locations would not have been added. Based on comments from the last two calls, their growth stems not only from adding more stores but also from restocking inventory at existing stores.
Thanks for the great write-up. Just question on your valuation: why are you not factoring in the acquisition case that the management is so clearly targeting e.g. a 4x revenue multiple on the 100m revenue target?
I wanted to demonstrate that the investment case does not rely solely on a potential acquisition. This company operates with an asset-light model, and with scale, they can achieve a very low multiple.
this is a nice story that you can buy - or not. either you bet on it and get well rewarded or you look elsewhere. but I think at least for the short to medium term 20-50% it should give you a small position. Even if you then miss out on the potential buyout price, you also avoid the potential loss. I'm thinking about it... as there still seems to be some room here.
Simply Better Brands is $1.16 today compared to $0.77 when this report was written. So, those that bought into the story in November, or earlier, have done well.
At $1.16, I'm not sure there is much upside in the stock for a few more months. In the last earnings call the CFO said that at $100M in sales, their target, if they dialed back marketing spend etc to more sustaining levels, they'd be at about $20M in earnings. With 120M fully diluted shares, that's earnings per share of $0.16. For a regular, steady state consumer product at a PE of 12, that gets you $1.90 a share. That's $1.90 a share on revenue levels more than double current amounts.
$1.16 seems to have already priced in a strong Q4 report in April and another strong Q1 in May.
I have purchased some bars to sample. We have tried multiple protein bars over the last few years. An initial note while purchasing on Amazon is the significant competition (RxBar, Simply Protein, Quest, Cliff, Lenny&Larry's etc...) that crowds the search for protein bar or even vegan protein bar. Also, the cost is 3x that of competitors. Not sure how large the market is for people willing to spend that much.
I'd be carefully using an energy drink as a comp. Energy drink have an addictive coffein component, which I believe is absent from Trubar. Food also generally brings a feeling of satiety that isn't so present with drinks (As made famous by Buffet investment with Coke).
Thanks for the writeup! Do you have any insights into their product velocity at the different retailers? I'm worried that their growth is mainly driven by stocking orders, since they're opening so many new locations. Now they need the products to perform well and sell through to get reorders, which I feel like we have no visibility into. Thoughts?
I can't definitively rule out that this might be the case, but both the CFO and the TRUBAR CEO stated in the last two calls, as well as in the Q3 2023 call, that they are performing very well at Costco locations, where they started in 2018. Costco has a hurdle rate of $1,000 in average sales per bar, and TRUBAR consistently exceeds this rate. This suggests strong performance; otherwise, additional Costco locations would not have been added. Based on comments from the last two calls, their growth stems not only from adding more stores but also from restocking inventory at existing stores.
They also mentioned it in the Q2 2023 call. https://youtu.be/bVaVr_BDsZU?si=6N1dMosewfFoMMb_
Thanks for the great write-up. Just question on your valuation: why are you not factoring in the acquisition case that the management is so clearly targeting e.g. a 4x revenue multiple on the 100m revenue target?
I wanted to demonstrate that the investment case does not rely solely on a potential acquisition. This company operates with an asset-light model, and with scale, they can achieve a very low multiple.
Got it, thanks for clarifying! In the end everything stands or falls with Trubar’s growth in either case, but good to understand your intention here.
this is a nice story that you can buy - or not. either you bet on it and get well rewarded or you look elsewhere. but I think at least for the short to medium term 20-50% it should give you a small position. Even if you then miss out on the potential buyout price, you also avoid the potential loss. I'm thinking about it... as there still seems to be some room here.
Simply Better Brands is $1.16 today compared to $0.77 when this report was written. So, those that bought into the story in November, or earlier, have done well.
At $1.16, I'm not sure there is much upside in the stock for a few more months. In the last earnings call the CFO said that at $100M in sales, their target, if they dialed back marketing spend etc to more sustaining levels, they'd be at about $20M in earnings. With 120M fully diluted shares, that's earnings per share of $0.16. For a regular, steady state consumer product at a PE of 12, that gets you $1.90 a share. That's $1.90 a share on revenue levels more than double current amounts.
$1.16 seems to have already priced in a strong Q4 report in April and another strong Q1 in May.
I have purchased some bars to sample. We have tried multiple protein bars over the last few years. An initial note while purchasing on Amazon is the significant competition (RxBar, Simply Protein, Quest, Cliff, Lenny&Larry's etc...) that crowds the search for protein bar or even vegan protein bar. Also, the cost is 3x that of competitors. Not sure how large the market is for people willing to spend that much.
Thanks for the succinct but interesting write-up.
I'd be carefully using an energy drink as a comp. Energy drink have an addictive coffein component, which I believe is absent from Trubar. Food also generally brings a feeling of satiety that isn't so present with drinks (As made famous by Buffet investment with Coke).
Hope this was mildly useful.