2 Hydroponics and Indoor Gardening supply Stocks To Watch: GrowGeneration Corp. and Scotts Miracle-Gro

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The Hydroponic Growing Equipment Stores industry has grown aggressively over the past five years. Increased consumer focus on healthy eating and the benefits of organic produce have benefited hydroponic food crop farmers that use the industry’s equipment for small-scale, regional growing operations. In addition to strong demand for fresh produce, a recent boom resulting from the growing prevalence of medical marijuana and marijuana legalization has fueled rising interest in hydroponic growing methods. Industry revenue is forecast to continue rising over the five years to 2022, as a result of rising popularity of quality organic produce along with increases in the market for both medical and recreational marijuana

The Global Hydroponics Market is poised to grow at a CAGR of around 6.4% over the next decade to reach approximately $13.73 billion by 2025.

 

GrowGeneration Corp. (“GrowGen”) (OTCQX:GRWG) owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 18 stores, which includes 6 locations in Colorado, 5 locations in California, 3 locations in Michigan, 2 locations in Las Vegas, 1 location in Rhode Island and 1 location in Washington. GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers. Our mission is to own and operate GrowGeneration branded stores in all the major legalized cannabis states.

1st Quarter 2018 Financial Highlights:

  • Revenue of $4.4 million, up 70% compared to revenue of $2.6 million for the 1st quarter of 2017.
  • The Company’s current cash position is $18 million.
  • Adjusted EBITDA for the quarter ended March 31, 2018 was $(366,945) compared to adjusted EBITDA of $(184,635)for the quarter ended March 31, 2017
  • The Company had $8.8 million in cash and cash equivalents at March 31, 2018
  • As of March 31, 2018, the Company had working capital of $14.3 million compared to working capital of $5.6 million at December 31, 2017.
  • The Company raised $1.2 million in equity capital through the issuance of common stock and the exercise of warrants and $9 million in convertible debt financing for the three-month period ended March 31, 2018.

Recent Acquisitions:

  • Central Coast Garden and Farm Supply (CCG) located in Salinas, CA. CCG generated approximately $1.7 Million in revenue in 2017 and will serve as a retail and warehouse location servicing the growing number of commercial cultivators in the Central Coast California market. Central Coast Garden and Farm Supply adds the 5th store to the GrowGen portfolio of stores in California.
  • Superior Growers Supply (SGS). The Company will consolidate an estimated $4.0 Million in revenue post the transaction. With over 20,000 sq. ft. of warehouse and retail space, SGS is a destination location, servicing growers in the state of Michigan. Headquartered in Michigan, SGS has retail stores in Lansing, South Lansing, and Livonia, with distribution facilities in the Lansing area.
  • Groco Supply located in Bellevue, WA. The assets include both inventory and customer accounts equaling up to $1.0M in new business for GrowGeneration Washington.
  • Humboldt Depot located in Arcata, CA. The Humboldt Depot operation generated approximately $4.0 Million in revenue in 2017 and this revenue will be added to the Company’s consolidated financial statement. Humboldt Depot also has a location in McKinleyville, CA which the company plans to open and operate as a 2nd location in Humboldt County.
  • East Coast Hydroponic Warehouse (ECHW) located in Warwick, RI. East Coast Hydroponic Warehouse is the largest hydroponic store on the East Coast. The Company will add an estimated $5.0 Million in revenue post the transaction. With over 10,000 sq. ft. of warehouse and retail space, ECHW is a destination location, servicing growers from Rhode Island, Massachusetts, Maine New York, New Hampshire and Vermont.

The Scotts Miracle-Gro Company (NYSE:SMG) is the world’s largest marketer of branded consumer products for lawn and garden care. The Company’s brands are among the most recognized in the industry. The Company’s Scotts®, Miracle-Gro® and Ortho® brands are market-leading in their categories, as is the consumer Roundup® brand, which is marketed in the U.S. and certain other countries by Scotts and owned by Monsanto. We maintain a minority interest in TruGreen®, the largest residential lawn care service business, and in Bonnie Plants®, the largest marketer of edible gardening plants in retail channels. The Company’s wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting and other materials used in the hydroponic growing segment. For additional information, visit us atwww.scottsmiraclegro.com.

The company recently announced record consumer purchase activity in May, potentially boosted by the rise in legalized recreational and medicinal marijuana use. Consumers purchases of its lawn and garden products rose 28% in May, totaling US$565mln. The surge in sales helped the company to recover nearly off its decline reported through the first seven months of the fiscal year.

Scotts is also in a better position to benefit from expansion in the U.S. marijuana market thanks to its acquisition of Sunlight Supply Opens a New Window. in April. This deal makes Scotts’ Hawthorne subsidiary the largest hydroponics supplier in the U.S. With Massachusetts legalizing recreational marijuana and Michigan potentially on the way to doing so, Hawthorne should enjoy solid growth in the future.

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