Inventure Group (NASDAQ:SNAK) may provide delicious snacks to its customers, but its stock could be the most appetizing thing on the menu for investors. With a recent agreement with Jamba Inc. (NASDAQ:JMBA) and six consecutive quarter of revenue and earnings growth, this company is quickly building itself into a successful specialty brand company.
Inventure’s national distribution network puts its products in major retailers in multiple channels, while its three manufacturing facilities provide it with substantial operational capacity. Meanwhile, its unparalleled brand loyalty has led strong 2009 performance that management anticipates will continue through the back half of the year.
A Look at the Second Quarter
During the second quarter, Inventure saw its net income increase 43% to $1 million, or $0.06 per share, on revenues that jumped 14.3% to $33.4 million. Gross profits jumped 19.8% due to increased sales at its Snack and Radar divisions and an increase in its pounds processed. Meanwhile, its balance sheet remains robust with $1.5 million in cash and a 1.23 current ratio.
Looking forward, Inventure plans to focus on building healthier and natural food solutions, building its indulgent specialty snack brands, and innovating by seeking acquisitions that compliment its existing brand portfolio. The two analysts covering the company expect it to earn $0.23 in 2009 and $0.28 in 2010 on revenues of $126.7 million and $136.6 million, respectively.
An Appetizing Value Play
On a valuation basis, Inventure continues to trade at a discount relatively to its growth and peer valuations. The company’s market captitalization to EBITDA is second lowest among other small cap consumer packaged goods companies. Meanwhile, the company has the fastest revenue growth rate among its peers and increasing in popularity.
Inventure’s also appears to be undervalued on a price-earnings to growth ratio basis. A conservative long-term growth rates of 20% per year suggests that its multiple should be closer to 20x compared to its current 16x. Combined, these metrics suggest that the stock should be trading closer to $4.60 if it can meet analyst expectations of $0.23 per share in 2009.
In the end, Inventure may have substantial growth and a low price-earnings to growth rate, but a catalyst is necessary to unlock substantial value. Recently, the company launched new products and entered into an agreement with Jamba Juice to develop a line of blend-and-serve frozen fruit smoothie kits. Investors are hoping this will prove even more successful than the company’s Burger King arrangement and drive earnings and visibility going forward.