Q1: Strong Export and Grocery Sales with Earnings up 24%....Great Quarter, to think that their new retail tasting room was only open for 6 weeks in the quarter and they saw such strong growth even with grape constraints which would of made the Q look even better. Digging through the numbers;
Revenue
Revenue up 5.3% (without grape constraint would have been up 10%) Under the hood it bodes real well going forward with massive growth still coming from export sales to Asia up 24% and grocery up 32%. This leads the way for accelerating revenue growth into the remainder of the year with continued double digit growth in its growth areas as they become a larger percentage of shares.
Gross Margin
Massive upside surprise! Up to 46.8% from 41.8% YoY is huge, the ability for them to put through that kind of price increase shows the demand for their products is rather inelastic and people will continue to flock to their brands. That gross margin expansion bring an additional 2M in annualized gross profit dollars down the income statement.
Profitability
EBITDA up 12% with Earnings up 24% is so strong. This just shows the EBITDA growth they are able to put up with limited revenue growth through margin expansion and economies of scale. As well just a quick shoot out to the cashflow figure up 25% to 1.2M bodes well for the future.
On Valuation: Given the strength in gross margin and exports sales I have bumped up my EBITDA target for this year to 5M which I feel is quite manageable. Putting a 12-14x EBITDA multiple on that figure you get a range of 0.42 – 0.50/share or 0.46/share at the midpoint or 60% upside.
The strategic value is so high here. Who know how much they would get bought out for, but I can promise you it will be much higher!
LONG getting LONGER