High Sequential Growth And Low Valuation Should Ignite This Under-Followed Stock

| About: ForeverGreen Worldwide (FVRG)

Savvy investors routinely seek out under-followed companies that may have reached a confirmed inflection point in its evolution. For example, catching an inflection point in the form of sustained and substantial revenue growth that exceeds expectations creates an opportunity for short-term and potentially long-term gains. Fast-growing yet largely under-followed ForeverGreen Worldwide Corporation (OTCQB:FVRG) perfectly fits this bill. With quarterly financials due out on November 14, we view FVRG as both a great trade opportunity and an intermediate-term growth play.

First, a little background is in order. ForeverGreen is an emerging nutraceutical company based in Orem, Utah that employs a network marketing distribution or MLM (multi-level-marketing) approach to sales. While ForeverGreen carries the typical natural whole foods, beverages, weight management products, and even hemp-based products like other network marketing firms of its ilk, there is one key product in its stable that clearly sets well ahead of the pack and is a major differentiator.

As a distributor, ForeverGreen offers PowerStrips, which combine a proprietary blend of ancient herbs, minerals and elements along into a patented and proprietary effortless product that is applied topically. Once applied, the technology uses muscle and tissue to activate and boost energy simultaneously in areas of pain and discomfort and at a cellular level, bringing rejuvenation to the body. With 1.5 billion people suffering from chronic pain, this product is a potential game changer as it has been awarded a Class 1 medical device listing, which is a differentiator in the market as compared to other, similar products sold today.

Each topically applied PowerStrip has two layers. The outer layer contains elemental Germanium. The inner or adhesive layer contains a proprietary blend of: Fermented Korean Red Ginseng, Silver and (Alpha-c CMPTM) Marine Phytoplankton. The unique ginseng contains Saponin which is an herb that is not consumed orally due to certain properties that in tests have not assimilated well through oral consumption despite its healing properties. Although specific efficacy data is limited, this herb has demonstrated to be effective in topical form. Testimonials from users of all ages are diverse and very positive. The strips are designed for use every 2 days and a 1-month pack of 15 strips costs $69.95.

According to recent filings and press releases, the company has enjoyed superior top-line growth in recent months, and we believe that management will markedly increase future revenue and earnings guidance on its 3Q13 conference call on Thursday, November 14. As noted in the press releases below, September 2013 sales grew by 90% over August 2013, and October sales rose by 20% over September.

For 2Q13, revenue grew by 48% on a sequential basis from the first quarter, with the company recording sales of $4M versus $2.7M in sales. Leveraging the huge popularity of its offerings and an addition of 3,200 new distributor sign-ups for its FGExpress division from August 2013, sales growth for September and even October continue to set records for the company. Big increases in new distributors are a great indication of much higher Q3 and future sales and provide management with enhanced visibility.

Interestingly, despite press releases outlining recent monthly sales growth, and the expectation of higher future financial guidance, this under-followed stock has pulled back in recent weeks following big gains from September to October. We believe that the pending quarterly financials release and subsequent guidance upgrade will serve as catalysts to drive the shares higher, based on its relatively low valuation and that continued success can support a higher stock price and valuation.

The current, company-stated expectation for revenue this year is $16M-$18M with EPS of $0.04-$0.06 and $30M-$40M in sales and EPS of $0.10-$0.15 in EPS for 2014. Even with only a 10% increase in top-line revenue guidance, we believe that FVRG could ultimately trade up to the $4.00-$4.50 range, which would represent a 1.5x revenue 2014 revenue multiple. It should be noted that this multiple is only a marginal premium to controversial comparables USANA (USNA) and Herbalife (HLF).

Moreover, the company should enjoy margin expansion in conjunction with its higher sales, which would favorably impact EPS enough to approach the $0.20 level next year. A $4.00 target would represent a 20x or so multiple on such EPS, which is certainly reasonable for a hyper-growth emerging growth stock in the early phases of its growth trajectory with a unique product offering edge.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.