The Great Rotation “Compelling Values” Webinar
At Singular Research, we focus on small and micro-cap stocks that are undercovered on Wall Street. These stocks have a niche business model and have yet to be widely discovered. Many of the global threats in the stock market today do not affect these stocks. Currently, there has been a huge wave of positive momentum in mega cap technology growth stocks; however, as that momentum slows, we are seeing a shift back into small-cap value investments. As of August 31, large-cap growth and the Nasdaq have had year-to-date returns of 21.6 and 26.7% while large-cap value and the Russell 2000 have returned (11.4) and (6.0)% over that same time period. Similarly, as of the end of August, the S&P 500 has a forward P/E ratio of 22.6 while Russell 2000’s small-cap value stocks (IWN) and micro-cap stocks (IWC) have forward P/E ratios of 11.7 and 11.4, respectively. Given this wide disparity in returns and valuations between large-cap growth and small-cap value stocks, we believe now is the time to focus your attention on small-cap value stocks as we are starting to see a new strong rotation back into small-cap stocks.
Our small-cap investor webinar will focus on top ranked emerging growth, undervalued, and undercovered companies that exemplify our research and provide exciting alpha opportunities at a time when small and micro-cap stocks are most justified for favorable returns. Please see below for a list of invited and presenting companies and a brief description with valuation metrics, an investment thesis, and recent quarterly highlights on three of the companies that are presenting.
Emergent BioSolutions, Inc. (EBS)
$144.00 Price Target, Buy, Current Price: $104.21 (9/8/20)
Emergent BioSolutions (EBS) is a global specialty life sciences company that develops and commercializes vaccines, drugs, and devices that address biodefense threats. The Company is a preferred provider of biodefense products and services to the U.S. government under multi-year contracts. The firm’s most valuable product, BioThrax, is the only FDA-approved anthrax vaccine. The Company’s products are sold mainly in the U.S. as well as internationally.
- Product sales improved 63% YOY to $298.5 million primarily due to increased sales of anthrax and smallpox vaccines. CDMO revenues grow 288% to $72.6 million as a result of new COVID-19 vaccine development and manufacturing contracts. Contract and grant revenues decline 42% to $23.6 million, reflecting development activities completed on the company’s new anthrax vaccine AV7909.
- EBS has emerged as a major player in the COVID 19 vaccine space. The company was awarded a $628 million task order by HHS for production of COVID-19 vaccine candidates through 2021 as part of Operation Warp Speed. EBS signed a 5-year manufacturing contract with JNJ beginning in 2021 and valued at $480 million for the first two years and a 3-year contract with AZN valued at $174 million through 2021. These follow initial agreements with JNJ and AZN valued at $135 million and $87 million, respectively, for CDMO services and to reserve manufacturing capacity.
- Other big contract awards include $34.6 million from the Defense Department to advance the company’s COVID-HIG therapeutic candidate, a contract option valued at $258 million for deliveries of anthrax vaccine to the Strategic National Stockpile (SNS) over 12 months, $176 million for deliveries of smallpox vaccine over 12 months to SNS and $54 million for deliveries of VGIV, which treats complications from smallpox vaccination, to SNS over 12 months.
NV5 Global, Inc. (NVEE)
$58.00 Price Target, Buy, Current Price: $50.57 (9/8/20)
NV5 Global, Inc. is a provider of professional and technical engineering and consulting solutions in the infrastructure, energy, construction, real estate, and environmental markets. The Company’s clients include U.S. federal, state, local governments, and the private sector.
- Q1:20 revenues increased 41% YOY to $165.4 million, fueled by organic growth and contributions from acquisitions. The Company exited the quarter with backlog up 30% YOY to $574 million.
- Adjusted EBITDA improved 58% YOY to $24.1 million, while EBITDA margin increased 170 bps to 18.6% in Q1:20 versus Q1:19.
- Adjusted EPS was up 10.2% YOY to $0.84 per diluted share.
- NVEE achieved contract wins across all business segments and ended the quarter with backlog up 30% YOY to $574 million.
- Although NVEE’s businesses are considered essential, the Company warns there could be COVID-19 related funding delays and project cancellations. Accordingly, NVEE withdrew its previously issued 2020 guidance.
Good Natured Products (GDNP.V)
$0.27 Price Target, Buy, Current Price: $0.14 (9/8/20)
Good Natured Products Inc., formerly Solegear, is an award-winning, publicly traded bioplastics company founded in 2006 and based in Vancouver, British Columbia, Canada. Good Natured is an innovator in the field of next generation bioplastics made from annually renewable plant-based sources.
- GDNP grew sales 98% to $10.1 million via a mix of new products, improved cross-selling and customer acquisitions.
- GDNP signed a one-year agreement to supply earth-friendly packaging to SmartPac and launched a new line of biodegradable containers and utensils for food service and restaurant carryout service.
- Gross margins rose to 34.4% in FY:19 from 33.9% in FY:18 due to improved overhead absorption and a better product and customer mix.
- SG&A as a percent of sales declined to 46% from 66% one year earlier. EBITDA loss narrowed to $1.44 million from $1.87 million, a 23% YOY improvement.We wish to thank our clients for their support and belief in our process. To learn more about Singular Research and register for a 14-day trial offer, please follow the link below.
To learn more about our “Compelling Values” webinar on October 1, please follow the link below. Although this is a private client webinar, we do have capacity for select institutional investors with the committed interest in small caps.
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