GrowGeneration Q3 Earnings: Can GRWG Hit Its $0.02 EPS Target?

in INVESTING IDEAS by

A couple weeks ago, Lake Street Capital initiated coverage of GrowGeneration with a Buy rating and $6.50 price target. Lake Street views the rising demand for cannabis products, creating new opportunities for the company as a supplier of growing equipment.

GrowGeneration - Stock Price

The stock has been soaring this year. GrowGeneration started the year of trading at around $2.37/share but closed on Friday at $4.77/share. So can the company keep the rally going with a strong earnings call on Monday?

GrowGeneration Corp. (OTCPK:GRWG) is scheduled to report Q3 earnings results on November 11, 2019. The company is expected to report earnings of $0.02/share on revenue of $20.621 million. The consensus earnings per share (EPS) of $0.02/share is based on a poll of 2 analysts. For the same quarter last year when the company reported earnings of -$0.02/share.

The revenue forecast of $20.621 million based on a poll of 3 analysts implies a year-over-year (YoY) growth of 145.5%. Last year the company reported $8.400 million in revenue for the quarter.

Expected to report EPS of $0.02 for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $20.62 $8.40 145.5%
EPS $0.02 -$0.02 NM

Earnings Call Trends

Historically, management has exceeded analyst expectations 2 out of the last 3 tracked quarters, and missed expectations 1 quarters.

What are your expectations from GrowGeneration for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2019 -$0.03 $0.01 NM Beat
Q4, 2018 -$0.03 -$0.03 NM Beat
Q3, 2018 -$0.02 -$0.02 NM Missed

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to GrowGeneration’s stock price performance? It’s more important for some companies than for others. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Before” column shows the closing stock price on the day before the earnings report, and the “Price After” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price reacted by increasing by 9.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-08 $4.65 $5.10 9.7% Increase
2019-05-07 $2.72 $3.12 14.7% Increase
2018-11-09 $4.12 $3.85 -6.6% Decline

Fundamentals And Technical Analysis

GrowGeneration is currently trading at $4.77/share, up 7.9% for the day. The company is trading at approximately 83.0% of its 52 week high of $5.75/share. The company’s stock price is up 2.6% since the last earnings report and flat over the previous week.

The following table summarizes some other key fundamental ratios:

Data as of November 10, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $4.77
Levered Free Cash Flow -$5.345 million

Company Profile: GrowGeneration Corp.

GrowGeneration Corp. is a micro-cap stock with a market capitalization of $172.8 million and a total enterprise value of $163.1 million. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

GrowGeneration Corp., through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States. It offers horticultural, organics, and lighting and hydroponics products, including lighting fixtures, nutrients, seeds and growing media, systems, trays, fans, filters, humidifiers and dehumidifiers, timers, instruments, water pumps, irrigation supplies, and hand tools.

The company also operates an online superstore, HeavyGardens.com for cultivators. The company serves commercial and urban cultivators growing specialty crops, including organics, greens, and plant-based medicines.

As of September 10, 2019, it operated 25 stores, including 5 locations in Colorado, 4 locations in California, 2 locations in Nevada, 1 location in Washington, 4 locations in Michigan, 1 location in Rhode Island, 4 locations in Oklahoma, 1 in New Hampshire, and 3 locations in Maine. The company was formerly known as Easylife Corp. GrowGeneration Corp. was founded in 2008 and is headquartered in Denver, Colorado.

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