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NYSE: NGVC 11/29/2012 Turner Novak. Buy 75 $19.88 $1,491 3.77% of portfolio.

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Presentation on theme: "NYSE: NGVC 11/29/2012 Turner Novak. Buy 75 $19.88 $1,491 3.77% of portfolio."— Presentation transcript:

1 NYSE: NGVC 11/29/2012 Turner Novak

2 Buy 75 $19.88 $1, % of portfolio

3 Company Overview Founded in 1955 Lakewood, CO Family owned

4 Product Overview Natural & organic groceries Dietary supplements Do not sell any products that are known to contain artificial or hydrogenated ingredients

5 Product Overview

6 Store Overview Efficient and flexible small-store format offering affordable prices and friendly environment Nutrition coaches in every store Free science-based nutrition education to help customers make well-informed nutrition choices

7 Store Overview 30 stores in Colorado 10 stores in Texas Room for growth nationally # of Stores # of States31113

8 Store Overview https://www.facebook.com/photo.php?v= https://www.facebook.com/photo.php?v=

9 Competitive Advantage Nutrition coach in every store – Free education sessions to customers in their stores – Customers are informed on health conscious decisions, and are already in the store to purchase products Stores concentrated in 1 regional area – Low distribution costs – Plans to expand rapidly within the region

10 Historical Price

11 Jeff’s Slide 7% Institutional ownership on November 13 th 36% Institutional ownership on November 28 th

12 Adjusted Net Income and EPS

13 Adjusted Net Income4,187, ,040, % Adjusted EPS Basic % Diluted

14 Capital Structure Paid off all long-term debt with cash raised from IPO Available $15 million line of credit Remaining long-term liabilities consist of deferred rent, lease, and income tax liabilities Current Assets35,077,19758,906,723 Total Assets78,915,383125,661,696 Current Liabilities33,971,97634,087,257 Long-Term Debt15,700,0000 Total Liabilities62,988,40452,712,519 Total Equity15,926,97972,949,177

15 Cash Flow & Capital Investments Cash flow is being re-invested in the company Cash generated from the IPO will increase capital investments CF From Operations16,741, ,202, % Capital Investments (New Stores) 20,446,12225,258, %

16 Strengths

17 Customers Loyal customer base 7.0% increase in # of customers in FY % increase in average Total paid per customer in FY 2012

18 Growth Sales increased 27.2% for fiscal year 2012 Organic sales growth of 11.6% for fiscal year 2012 Positive organic growth for over 5 years

19

20 Growth Net Income increased 89.9% in FY 2012 Net Income increased 64.0% in Q4 excluding costs of their IPO Adjusted FY 12 EPS of $0.36 Projected FY13 EPS of $0.46-$0.49

21 Weaknesses

22 Inventory Costs Higher inventory costs than non-organic grocery stores – Leads to higher profits, as long as inventory is sold

23 Opportunities

24 Growth Opportunities Analysts’ project the U.S. market can support at least 1,100 Natural Grocers stores, including over 180 additional Natural Grocers stores in the 12 states in which NGVC currently operates or have signed leases – 38 states with no presence, 48 states with small presence US demand for vitamins and supplements has increased every year for the past 10 years

25 Growth of US Vitamin/Supplement Use

26 Growth of US Organic Food Sales ,000,000,00028,682,000,000 (1 Billion)( Billion) Projected 12.2% CAGR in

27 Growth of US Organic Food Sales Organic US food industry grew 7.7% in 2010 Total US food industry grew 0.6% in 2010 Test scenarios show organic growth will outpace total US food sales by at least 5.1% in economic downturns % Growth Organic US Food Sales $ 26,473,486,000 $ 28,682,000,0007.7% Total US Food Sales $ 668,962,000,000 $ 673,000,000,0000.6%

28 US Food Sales 2010% Total Organic US Food Sales $ 28,682,000,0004% Total US Food Sales $ 673,000,000,000100% Organic food consists of only 4% of total US food sales Large opportunity for growth

29 Organic Food Channels 2010 Sales% Mass Retailers $ 15,488,280,00054% Natural Retailers $ 11,185,980,00039% Other $ 2,007,740,0007% Total Sales $ 28,682,000,000100% Mass retailers – Meijer, Costco, Safeway, etc. Natural Retailers – NGVC, Whole Food Stores Other – Internet, Farmers Markets, etc. Room for growth in existing organic food market

30 Threats

31 Risks What could go wrong? – New store openings are not as successful as openings in the past 3 years – Payback period just under 4 years, however stores opened this year are projected to do better than new stores opened in the past – Recent legal proposals in Colorado affect the way consumers spend money

32 Consumer Demand Organic foods are more expensive than non- organic – Also have higher margins Eating organic/gluten-free is a lifestyle Studies show that those who buy organic will do so no matter what the price is

33 Competitors Major Competitors – Whole Foods Market Other Competitors – Costco – Safeway – Krogers

34 Investment Thesis High growth potential – 89.47% Adjusted EPS growth in 2012 – Consistent organic sales growth for over 10 years Zero long-term debt – Available $15 million Line of Credit Great cash flow – Operation Margin higher than Grocery Stores industry average Business model matches consumer trends

35 Buy 75 $19.88 $1, % of portfolio


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