- 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.
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.
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.
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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