MusclePharm (OTCQB: MSLP) recently traded as high as $12.49, a new six-month high. The stock has more than doubled from the mid-$5 range since we interviewed co-founder and CEO Brad Pyatt on "The RedChip Money Report" back in February. Investors are starting to take notice of the opportunity this stock represents. If its first-quarter numbers are any indication, MSLP is poised for a momentous 2013.
MusclePharm is one of the most popular workout supplement brands on the market. Its products are sold in more than 10,000 U.S. retail outlets, including GNC, the Vitamin Shoppe, and Vitamin World. As many as eight of its products consistently rank among Bodybuilding.com's top 50 best sellers, out of over 14,000 items. MSLP is the official nutritional sponsor of the Ultimate Fighting Championship, the world's largest mixed martial arts organization, and is endorsed by numerous UFC fighters, NFL players, and other athletes.
The Company's rapid sales growth is one reason investors are starting to pay attention. MSLP has achieved triple-digit annual revenue growth over the past four years. The Company generated an estimated $78 million in sales last year and expects to top $100 million in 2013. This growth is particularly impressive when you consider that the Company originally operated out of the CEO's garage.
MSLP is also posting strong quarterly financial improvements. The Company recently announced record quarterly revenue of $24.9 million (up 29% from the first quarter of 2012) and reported its first quarter of positive adjusted net income. During Q1, the Company also became debt free and reported a working capital surplus for the first time. The cost-cutting initiatives undertaken by the Company over the past two quarters should lead to continued margin expansion going forward.
A key area of growth for the Company is the international market, which constitutes approximately 35 percent of total sales. MSLP's products are distributed in more than 110 countries, and the Company continues to see strong growth in the EU, Australia, and South America. According to John Bluher, co-chairman and executive vice president of MSLP, the Company's sponsorship of the UFC plays an important role in international sales growth. As the UFC continues to expand internationally, MSLP is pulled into new markets.
According to the Nutritional Business Journal, nutritional supplements are one of the world's fastest-growing industries. Consumers spent $32 billion on supplements in 2012. That number is expected to more than double by 2021 as consumers become increasingly health-conscious.
With numerous options for consumers to choose from, why are MSLP's workout supplements gaining such strong momentum with consumers? One major factor is the strong R&D behind each new product. The Company's chief medical officer is a leading sports nutrition doctor, and MSLP's scientific team includes top former researchers from major pharmaceutical companies and government agencies. All MSLP products are free of banned substances, undergo clinical studies, and are tested on professional athletes at the Company's sports science center in Colorado. The products are also tested and certified by some of the world's leading independent testing organizations, ensuring their safety and legality.
MSLP was founded by professional athletes; CEO Brad Pyatt is a former NFL player, and Executive Vice President Cory Gregory is an international fitness icon. Consumers trust MSLP's products because they know the founders use them and live the lifestyle of their customers.
As we've previously noted, investors can make a fortune following in the footsteps of highly successful investors such as John Pappajohn and Warren Buffett. One of the most successful investors in the healthcare space is billionaire entrepreneur Dr. Phillip Frost, a member of the Forbes 400. Dr. Frost was the chairman of Key Pharmaceuticals, which Schering-Plough later purchased for $600 million. He then founded pharmaceutical company Ivax, which he sold to Teva in 2005 for $7.4 billion. Dr. Frost led a $12 million round of financing for MSLP in January and is one of the Company's largest shareholders.
Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.