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- Weak third quarter results, coupled with a negative full year earnings revision have sent shares of MusclePharm spiraling, down 34% in just the last month and a half.
- The outlook for MusclePharm appears to be very bright, as I expect the company to tally their first full year operating gain in 2015.
- Based on my analysis, shares of MusclePharm are currently trading at a 29% discount to fair market value.
Market Overreaction An Early Holiday Gift, MusclePharm Trading At Less Than Half Of Intrinsic Value
- MusclePharm has sold off 33% after Q3 earnings, now down 40% from its 52-week high and deeply oversold. Now trades at 0.48x 2015 analyst sales estimates, 16.3x 2015 earnings estimates.
- Taking a closer look at the cash flow statement reveals liquidity concerns are overblown, prepayment of 2015 sponsorship fees removes a headwind to 2015 earnings.
- Three MusclePharm executives have taken advantage of the sell-off and have added shares, now eight different insiders have purchased shares since the end of last November.
- CEO suggests investors should look at Schiff Nutrition when attempting to come up with a fair value for MusclePharm, Schiff was acquired by Reckitt Benckiser at 28x EBITDA, 3.5x Sales.
- Future of MusclePharm is still bright, bull case suggests 360%+ upside, base case implies 120% upside and bear case suggests 30% downside creating asymmetric opportunity for investors.
MusclePharm Corp.: An Undiscovered Growth Story With Over 80% Upside
- MusclePharm is substantially undervalued, trading at 29x this year's expected earnings, 23x my 2015 earnings estimates and 5.8x my 2016 earnings estimates.
- Expected to enter the large and fast growing sports and energy drink markets in late 2014, early 2015.
- Gross margin growth and guidance are unappreciated; MusclePharm could achieve 40-45% gross margins over the next few years, while 1H 2014 was ahead of guidance at 34.6% vs guidance of 33%.
- Sports supplement industry has consolidated heavily over the past six years; with Post Holdings and Glanbia PLC making multiple acquisitions, MusclePharm is a potential takeover target.
- Recent insider buying by six different executives along with share repurchases totaling 250,000 shares and a new revolving credit facility for up to $8 million demonstrate change in management philosophy.
Update: Implications Of MusclePharm Buying Back Stock
- MusclePharm bought back 250,000 shares of its own stock.
- This has implications for my existing thesis that MusclePharm is evolving from a dilutive company to one that cares about dilution.
- In two different ways, this confirms MusclePharm's positive prospects going forward.
- MusclePharm's long thesis requires continued growth.
- This growth is supported by new products and expanded distribution.
- Today's news fits squarely into the growth thesis, by bringing expanded distribution of two products that fit particularly well with Wal-Mart's clientele.
Update: Recent Developments Keep MusclePharm Thesis On Track
- Developments at MusclePharm continue to reinforce the original thesis.
- There are further clues that the company has abandoned its dilutive ways.
- The company is also launching new products which should be enough to keep growth alive.
MusclePharm Corp.: Successful Despite Management's Best Efforts
- MusclePharm has once again shown impressive growth for sales, profit, and income.
- When looking at past quarters, it is evident the company was run by amateurs with connections in the sports industry.
- The growth of the company comes because of the great product lineup and connections in the sporting industry, not because of the great business acumen of the leadership.
- In previous comparisons, I compared MusclePharm to the growth stocks of today.
- This time, I compare it to a directly comparable company, but ten years ago.
- The result shows how MusclePharm is tracking the Monster Beverage story, and how if it manages to keep tracking that story its share price will explode upwards tremendously.
Update: MusclePharm Insider Buying Reinforces Thesis
- Insider selling, or even buying, most time means little.
- However here it's synergistic with my previous thesis.
- The thesis is thus reinforced by the insider buying taking place in the last few days.
MusclePharm Is Clearly On Track, Has Massive Potential
- Most recent guidance shows MusclePharm is clearly on track.
- Yet, the discount to other growth names seems to massive that one needs to look at the reasons for such being so.
- The main reason is that MusclePharm still looks like the former penny stock insider-dealing dilutive company it once seemed to be.
- A closer look at the reasons for MusclePharm looking that way reveals that a transition took place, and the red flags we identify are actually signs of a bright future.
- Given how fast MusclePharm is growing, and how profitable such growth will become, it's likely that MusclePharm has multi-bag upside potential as soon as the market recognizes the transition.
An Undiscovered Brand With Improving Margins And Strong Growth
- MusclePharm has successfully built customer-facing brands.
- In doing so, it has entered into a massive growth trajectory, which recently turned profitable.
- Still, the stock doesn't yet trade at growth multiples, given a checkered past.
- I'd expect there to be at least 50-100% upside on a growth re-rating or acquisition interest alone. And possibly much more if the growth trajectory stays intact.
MusclePharm: 5 Reasons Why Shares Remain Undervalued For Long-Term Investors
- New Deal with Tiger Woods could Accelerate Launch of Dropz energy drink brand.
- FitMiss continues to see retail expansion and gains valuable endorsee in Jen Setler.
- Company trades at less than 1x sales and 11x expected forward earnings per share.
MusclePharm: Substantially Undervalued And Strong Acquisition Target
- MusclePharm’s growth continues to exceed expectations; new product launches will drive future growth.
- The stock is trading at a 100% discount to fair value; uplisting to NASDAQ is a near-term catalyst.
- The company is a strong acquisition target due to industry consolidation, could fetch over $300 million.
- Investors and analysts have been critical of excessive dilution and executive compensation.
- The company has grown sales to $110 million, a valuation of .6X sales.
- Once the company is listed on the NASDAQ investors can expect to see the price take off.
MusclePharm: After Strong Q4 2013, Shares Continue To Be Undervalued, Activist Hedge Fund Acquires 11% Stake
- MSLP's strong 4Q13 growth in net sales shows new product launches and distribution deals are gaining traction. Margin compression likely to be temporary as BioZone acquisition is being integrated.
- Activist hedge fund Wynnefield Capital buys 11% stake at $8.29 average per share. Has been previously vocal about common shareholder dilution at MusclePharm.
- Taking a closer look at 4Q13, 2014 guidance seems conservative.
- Shares continue to be undervalued trading under $7 with a near-term price target of $12.
Nov. 17, 2014, 10:52 AM
- Sports nutrition firm MusclePharm (OTCQB:MSLP -16.1%) slumps on light turnover of 132K shares in response to its Q3 earnings report after Friday's close. EPS of $0.05 missed estimates by $0.29. Also, its cash balance is only $2.9M.
- Management affirms its full-year revenue guidance of $185M - 195M, but revises its EPS guidance to $0.20 - 0.22.
Oct. 21, 2014, 7:54 AM
Aug. 4, 2014, 5:43 PM
- MusclePharm Corp. (OTCQB:MSLP -0.9%) Q2 results: Net Sales: $46.7M (+831%); Gross Profit: $15.6M (+97.5%); Operating Expenses: $15.2M (+42.1%); Operating Income: $479.5K (+118.5%); Net Income: $408.3K (+166.7%); EPS: $0.03 (+108.8%).
- Conspicuous by their absence are the company's balance of cash/cash equivalents and CF Ops. The current assets listed on the balance sheet are most certainly dominated by accounts receivable.
- 2014 Guidance: Net sales: $185M - 195M; EPS: $0.45 - 0.50.
Jun. 24, 2014, 9:00 AM
- MusclePharm (MSLP) expands its footprint with major distributor (GNC). The retailer will now feature all of MSLP's brands on a dedicated wall in all of its U.S. corporate stores. The agreement nearly doubles the number of outlets carrying the products to more than 4,000. The initiative will ramp up in Q3.
Jun. 18, 2014, 10:35 AM
- MusclePharm (MSLP +7.4%) signs a multi-year endorsement deal with golfer Tiger Woods for the term July 1, 2014 - June 30, 2018. The deal includes the company name and logo on his golf bag, the right to use his name and likeness in advertisements and commercials and personal appearances.
- Under the terms of the agreement, the company will pay Woods an annual cash retainer, $5M of MSLP stock and royalties on sales of all branded product.
- The company's lineup of celebrity athlete endorsers also includes Arnold Schwarzenegger and football players Eric Decker and Colin Kaepernick.
May. 14, 2014, 11:21 AM
- On May 12, COO Richard Estalella resigned effective immediately. He will continue to serve as MusclePharm's (MSLP -0.8%) President. Jim Greenwell resigned from the Board of Directors effective immediately to assume the COO role on May 16.
- The company will pay Mr. Greenwell a base salary of $275K, a bonus of up to $300K and 100K shares of stock.
- The BOD extends the employment agreements of Brad Pyatt and Cory Gregory to December 31, 2018. As a sweetener, Mr. Pyatt receives 500K shares of stock and Mr. Gregory 100K shares. Both vest 20%/year.
May. 5, 2014, 10:09 AM
- Net sales: $50.2M (+122%), operating income: $2.4M vs a loss of $0.72M, net income: $2.7M vs a loss of $7.4M, EPS: $0.23 vs ($1.78).
- International sales: $17.2M (+176%).
- Cash at quarter end: $5.8M.
- 2014 guidance:
- Net sales: $165 - 175M.
- EPS: $0.41 - 0.51.
- (MSLP +22.8%) shares jump in early trading on light volume.
Apr. 14, 2014, 9:37 AM
- Brad Pyatt resigns as President effective April 16 but will continue to serve as CEO and COB. Richard Estalella appointed as President.
- CFO L. Gary Davis resigns effective April 15 but will work on special projects until December 31, 2014.
- Board member Donald Prosser resigns effective April 16 to assume the CFO role.
- (MSLP) regulatory filing.
MSLP vs. ETF Alternatives
Headquartered in Denver, Colorado, MusclePharm is a rapidly expanding healthy life-style company that develops and manufactures a full line of NSF and scientifically approved nutritional supplements that are 100% free of any banned substances. Based on years of research, MusclePharm products are... More
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