GrowGeneration: Growth and Opportunity, or Dead on the Vine in 2021?

(Disclaimer: These articles are merely informational in nature, and in no way should be considered expert financial advice. As with any investment, psilocybin stocks, especially those owned by newer companies, are subject to significant fluctuations in value. Therefore, caution should always be observed when investing.)

Company:  GrowGeneration Inc

Stock: GRWG

Investment Risks:  Moderate/High 

Investment Rewards:  Moderate

Current Price:  $29.08/share 

Company Background:  According to their website, GrowGeneration is “the largest hydroponics supplier in the country with 58 retail and distribution centers.” As such, it distinguishes itself from other publicly traded companies that are involved in the production, distribution, and retail sales of cannabis/marijuana products. Instead, GrowGeneration offers a diverse line of growing products and hydroponic equipment, including “organic nutrients and soils” and “ advanced lighting technology.”

The Denver-based company also offers a direct-to-farm delivery service along with equipment financing. Additionally, the GrowGenertion provides access to a “Commercial Team [that] offers a one-stop-shop for all your supply needs from seed to harvest, including turnkey facility designs, cultivation room designs, and on-site project consultations.”

(PRNewsfoto/GrowGeneration Corp.)

 Leadership:  GrowGeneration Management team consists of: 

  • Darren Lampert, CEO & Co-Founder
  • Michael Salaman, President & Co-Founder
  • Tony Sullivan, Chief Operating Officer, Executive VP
  • Jeff Lasher, Chief Financial Officer
  • Paul Rutenis, Chief Merchandising Officer
  • Bob Nardelli, Senior Strategic Advisor
  • Dennis Sheldon, Senior Vice President of Global Supply Chain

Performance:  According to an August 12, official company release, GrowGeneration had a banner second quarter, with the following financial highlights:

  • Record Revenue increased 190% to $125.9 million; 
  • Net Income of $6.7 million up 161%;
  • Adjusted EBITDA of $14.5 million, a 229% increase;
  • 2021 Revenue Guidance Raised to $455 to $475 Million
  • Comparable Store Sales for the Quarter Increased 60% from Prior Year
  • Record Diluted Earnings of $0.11 Per Share in the Quarter

GrowGeneration’s stock performance, however, has not been sterling. Although the stock has grown approximately 600% since its IPO in February of 2018, from $5.11/share to a current $29.08/share, it has plummeted to nearly half its value currently since February of 2021, and has dropped precipitously since the beginning of August, from a high of $43.60 on August 11, just one week’s time before this writing. And even back in February, Motley Fool reports, “Perhaps the main reason why investors might not want to buy GrowGeneration stock right now is its valuation. Shares currently trade at more than 824 times earnings. That’s a price-to-earnings (P/E) multiple that goes beyond nosebleed level.”

Moreover, states, “GrowGeneration Corp holds several negative signals and is within a very wide and falling trend, so we believe it will still perform weakly in the next couple of days or weeks. We therefore hold a negative evaluation of this stock.” 

But, it may not be all bad news. While Zacks gives GrowGeneration an overall VGM score of 3, they also give a recommendation of “hold,” meaning they likely think the stock will eventually increase in value.  

Final Thoughts:  With a price point of nearly $30/share, GRWG doesn’t offer an easy entrance into the market. However, given the company’s earnings and the general upward trend of the American economy, combined with the dynamic of increasing legalization of marijuana in multiple states, the demand for the products they create seems to be in place. Therefore, if you invest, you’ll want to keep an eye on the stock in the medium term and look for a selling point where its price reaches the highs in the $40+/share it previously enjoyed before potentially selling off. 


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