Shares of
GrowGeneration Corp.
GRWG
have soared 178% over the past three months compared with the
industry
’s growth of 37.9%. The company has been benefiting from ongoing strength in sales on all fronts — online, commercial and retail. It has been active on the acquisition front, adding to its stores and expanding geographical presence. Backed by these, the company pre-announced record full-year 2020 revenues and hiked its revenue guidance for fiscal 2021, which in turn contributed to its share price. Further, its omni-channel approach launched in September 2020, has been driving to the rally.
GrowGeneration’s full-year 2020 revenues were $192 million compared with $80 million in 2019. The top line outpaced the company’s guidance of $185-$190 million. This performance can be attributed to its strategic acquisitions, expansion of omnichannel and private label offerings, and robust same-store sales growth. The company raised revenue guidance for 2021 to the range of $335 million to $350 million. It projects adjusted EBITDA between $38 million and $40 million.
GrowGeneration is witnessing robust sales in both retail and online channels. The company is averaging 12,000 walk-in transactions per week. New visitors to its website are trending over 100,000 per month. The company has rebranded its existing e-commerce operation, HeavyGarden.com and GrowGen.Pro, as growgeneration.com, which is an omni-channel sales approach to facilitate e-commerce across all its locations. It is more customer friendly and will provide both options — delivery or pick-up from store. This initiative is expected to bolster sales.
The commercial services around 1,000 commercial accounts and the company has identified over 14,000 licensed hemp and cannabis growers in the United States, and believes there is significant room to expand its base of commercial customers.
The company made eight acquisitions in 2020, taking its tally of retail stores to 39. It has a target to expand to 55 garden centers in 2021. Management estimates that roughly 1,000 hydroponic stores are in operation in the United States and by 2025, the global hydroponics system market is estimated to reach approximately $16 billion. Hydroponics have been a staple in cannabis cultivation, and as states across the country continue to legalize the same, the company’s products are in demand.
Moreover, an upward revision in earnings estimates for fiscal 2021 and 2022 reflects analysts’ confidence in the company’s potential. Over the past 90 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 21.7% and the same for fiscal 2021 has gone up 10.7%.
The Zacks Consensus Estimate for 2021 and 2022 earnings suggest year-over-year growth of 153% and 50%, respectively.
Zacks Rank & Stocks to Consider
GrowGeneration currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space include
Fortescue Metals Group Limited
FSUGY
,
Impala Platinum Holdings Limited
IMPUY
and
BHP Group
BHP
.
Fortescue has a projected earnings growth rate of 75.5% for the current fiscal. The company’s shares have surged around 62% in the past three months. It currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Impala Platinum has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 38% over the past three months. It currently carries a Zacks Rank #1.
BHP Group has a projected earnings growth rate of 59.5% for the current fiscal year. Over the past three months, the company’s shares have appreciated around 40%. It currently carries a Zacks Rank #1.
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