GrowGeneration Corp. retails hydroponic and organic specialty gardening products. If you had taken our advice to buy this cannabis stock last year, you’d be up 462% on your money. Like most other stocks in the cannabis sector, GrowGeneration stock is currently down 10% – but why is GrowGeneration a Strong Buy?
The company owns and operates a chain retail hydroponic and gardening stores and an online e-commerce store, HeavyGardens. Its stores sell various products, including organic nutrients and soils, advanced lighting technology, hydroponic and aquaponic equipment, and other products needed to grow indoors and outdoors.
Let’s take a closer look at the fundamentals and technicals of GrowGeneration to substantiate our case for the stock being a strong buy.
Grow Generation Fundamentals
HQ: Denver, CO, USA
Symbol: GRWG (Nasdaq)
GrowGeneration Focus: Strong
GrowGeneration is one of the largest specialty organic and hydroponic gardening retail chains across the United States. The company is focused on expanding to new markets by opening new retail centers, acquiring cannabis cultivation licenses in target states, acquiring new companies, and maintaining positive financial growth.
Company Size: Strong
Market Cap: US $2.08 billion
Enterprise Value: US $1.91 billion
# of employees: 590
Majority Subsidiaries: Grow Warehouse; Downriver Hydroponics; Grassroots Hydroponics; Agron LLC; Aquarius Hydroponics; Indoor Garden and Lighting Inc; Seattle’s Hydro Spot LLC.
GrowGeneration Operations: Neutral
Current production: None
Future production: None
Direct sales: Yes, heavygardens.com
Store networks: Fifty three specialty retail centers in twelve US states
Supply agreements: GrowGeneration has supply agreements with Hawthorne Gardening, Hydrofarm, DL Wholesale and Humboldt Wholesale
Vertically integrated: No
Horizontally diversified: Yes
Company Financials: Strong
Revenue (ttm): $250.4 million
Outstanding shares (diluted): 58.4 million
GrowGeneration Management: Strong
CEO: Darren Lampert (co-Founder)
CFO: Jeffrey Lasher
COO: Tony Sullivan
GrowGeneration’s senior management has extensive experience in executing specialty retail growth and expansion strategies. Darren Lampert brings more than 25 years of experience in various senior management positions. Tony Sullivan bring more than 20 years’ experience in managing large retails chains and designing acquisition
strategies. Michael Salaman is the other co-Founder. Although management is strong, why is GrowGeneration a strong buy?
Company Branding: Neutral
GrowGeneration is marketing their specialty stores and online store brands through billboards, in-store merchandising, trade shows, social media and vehicle wraps. Each subsidiary of GrowGeneration is branded accordingly to represent the specialized services or products they offer. The main e-commerce website is branded as HeavyGardens.
GrowGeneration Valuation: Strong
Current share price: US $39.93
52 week high/low: $5.42-67.75
Price to Sales: 8.54
Company Financing: Neutral
Q1 2021 financials showed $133.1 million in cash and cash equivalents. With revenues increasing for the last four quarters, they should have plenty of cash to continue their aggressive expansion plans.
Risks of Investing in GrowGeneration Stock: Low
The risks of investing in any cannabis company are currently high given the newness of the market. The risks of investing in GrowGeneration are much less than many cannabis companies in that they are ancillary to the growing industry and don’t touch cannabis plants. Sure, the risks are lower but why is GrowGeneration a strong buy?
Bottom Line: Why is GrowGeneration a Strong Buy?
GrowGeneration is one of the largest specialty organic and hydroponic gardening retail chains across the United States. The company is focused on expanding to new markets by opening new retail centers, acquiring cannabis cultivation licenses in target states, acquiring new companies, and maintaining its positive financial growth.
Through 2020 they were able to expand to 52 stores in the USA across 12 states. They are targeting 60 stores by 2021’s end and 100 by 2023. They are aggressive.
GrowGeneration financials are also looking aggressive. In fact, their commercial division grew 1885, the e-commerce channel grew 123%, and same store sales were up 635 in 2020 over 2019. Revenue targets for 2021 are currently at $430 million which would be around $50 million in EBITDA.
They are targeting generating 10% of their revenue through private label offerings at their stores. This would be significant. They already have a large number of name brands at their stores to compete.
Interestingly enough, almost 525 of their shares are owned by institutions with 7% held by insiders. The large money loves the picks and shovels players and GrowGeneration is certainly that. With 14 new/acquired locations in 2020, watch for the same trends in 2021. For all the reasons above, this stock gets the strong rating with all signs pointing to regaining those 40% losses from early 2021.
Why is GrowGeneration a Strong Buy?
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