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GrowGeneration (GRWG) Wraps Up Acquisition of The GrowBiz

Zacks Equity Research
·4 min read

GrowGeneration Corp. GRWG has completed the previously-announced acquisition of The GrowBiz — the third largest chain of hydroponic garden centers in the United States. GrowBiz operates through five stores located across California and Oregon. The acquisition will add around $50 million to GrowGeneration’s annual revenues.

Following the buyout, GrowGeneration’s total number of hydroponic garden centers currently stands at 36, with the new locations in Rocklin, Cotati, Santa Cruz and San Luis Obispo, CA, and Portland, OR.

GrowGeneration’s performance is associated with the cannabis industry’s growth, which has been witnessing significant expansion, of late. Given that California accounts for 20% of the United States’ legal cannabis sales, it is a crucial market for GrowGeneration. The GrowBiz store locations complement the company’s current geographic footprint, bringing the total number of GrowGeneration Stores to 10 in California and two in Oregon. GrowGeneration remains committed to add 50 garden centers and 15 states in 2021, with strategic growth in key markets, both organically and through acquisitions.

The latest buyout reflects the company’s sixth acquisition in the current year. Recently, the company reported third-quarter 2020 adjusted earnings of 6 cents per share, in line with the Zacks Consensus Estimate. Revenues of $55 million beat the Zacks Consensus Estimate of $46 million and increased year over year. GrowGeneration reported adjusted EBITDA of $6.6 million compared with the year-ago quarter’s $2 million. Notably, the company generated record revenues and EBITDA growth for the 11th consecutive quarter.

Therefore, the company has raised the ongoing year’s revenue guidance to $185-$190 million from the prior projection of $170-$175 million. Adjusted EBITDA is now expected between $19 million and $20 million, up from the previous estimate of $17-$18 million.

Also, revenues for 2021 are now expected between $280 million and $300 million, up from the prior guided range of $245 million to $260 million. Adjusted EBITDA guidance for 2021 is expected between $34 million and $36 million, up from the previous forecast of $26-$28 million.

GrowGeneration was marked as an essential supplier to the agricultural industry amid the pandemic, and thus, all of its stores have been in operation. Notably, the company is witnessing an average of 12,000 walk-in transactions per week.

Moreover, the company’s online sales have been surging this year, as reflected by the 140% surge in the first nine months of the year. New visitors to the company’s website are now trending at more than 100,000 per month. Sales to commercial customers, including expert growers and cultivators, have been rising given its continued focus on increasing commercial revenues by adding new customer accounts.

The company’s focus on margin-expansion strategies that include furthering the deployment of more private label products and driving efficiency at the purchasing level will likely stoke growth in the near term.

Price Performance

Shares of the company have soared 614.7% over the past year, compared with the industry’s growth of 8.5%.



Zacks Rank & Stocks to Consider

GrowGeneration currently carries a Zacks Rank #3 (Hold)

Some better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Barrick Gold Corporation GOLD and Newmont Corporation NEM. While Agnico Eagle Mines and Barrick Gold flaunt a Zacks Rank #1 (Strong Buy), Newmont (NEM) carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines Limited has an expected earnings growth rate of a whopping 103% for the current year. The company’s shares have rallied 38% over the past year.

Barrick Gold has an estimated earnings growth rate of 99% for the ongoing year. Its shares have appreciated 67% in the past year.

Newmont has a projected earnings growth rate of 98% for 2020. The stock has appreciated 72% in a year’s time.

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You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
 
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Newmont Corporation (NEM) : Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
 
Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
 
GrowGeneration Corp. (GRWG) : Free Stock Analysis Report
 
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