Company Profile: Peekaboo Beans Inc.
I am just back from vacationing with my sister and her family. She dresses her two daughters (ages 5 and 3) in a lot of Peekaboo Beans clothing. As I was admiring the constant parade of new clothing on her daughters all week, she mentioned it had recently gone public and that I should do a post about it. So, I looked into it and decided I would profile this penny stock.
Judging from what I have seen on my nieces, I think the quality and design of the clothing is amazing. They have some very neat designs and styles that look great on little kids (target market is infant to 10 years of age) and I love the logo. Unfortunately, the clothes are quite pricey. You get what you pay for in terms of quality and design but the higher price point likely reflects the fact that this company is a direct-sales retailer. This means home parties, home parties and more home parties! The middle person (likely your local stay at home Mom) needs to make some money so it all gets built into the cost of the clothing. I am skeptical of the long-term prospects of many direct sales retailers as they seem to last for as long as the middleman can keep up the pace of the neighbourhood home parties without alienating all her friends and family. But, many of these companies are no longer the cheesy, pyramid, multi-level marketing enterprises of yesteryear. Today, they sell some high quality and interesting products (I am thinking of Stella & Dot, Norwex, Rodan + Fields, Pampered Chef, etc.). Plus, the direct sales market appears to be large and according to many, a significant retail disrupter that has many advantages over the traditional bricks and mortar stores.
· As stated many times on this site, I, nor ZSM Creative Inc. operating as The Capital Pink, are financial advisors and have no financial accreditations. I am applying some basic evaluation tools to this stock along with some commentary but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer. Also, I do not own Peekaboo Beans stock and am not affiliated with them in any manner.
What is Peekaboo Beans Inc. (Peekaboo Beans)?
Peekaboo Beans is a Vancouver based company founded in 2006 that recently went public (September 2016) and now trades on the TSX- Venture. The TSX- Venture is stock market for emerging companies. The TSX is the senior equity market to the TSX-Venture. The Venture provides public capital for small companies such as Peekaboo Beans. As taken from Peekaboo Beans' investor material: “Peekaboo Beans Inc. is a direct-sales retailer of high-quality children's apparel. Our award winning brand and apparel promotes the importance of playtime over screen time, through thoughtful designs and custom developed fabrics. Through the direct-sales model, we train people to be entrepreneurs and build a business and generate income on their own terms.”
Its projected revenue for 2017 is $4 million and of most significance, is its aggressive entrance into the US market. The demand from “stylists” to sell the clothing in the US is substantial according to the website. Other relevant items as taken from the company investor presentation:
· 1,280 stylists work for the company which is up 30% year over year;
· Tightly held share count at just over 11 million shares – a tightly held share count is desirable as a company can raise more money if need be by issuing more shares and still not have a large amount of shares outstanding and less overall shares means shareholders can take a more meaningful position in the company;
· Average order size per home party is $148 v. $70 industry average;
· Successfully launched its US customer website in 2017 with the US stylist portal;
· The company is vertically integrated which means it designs the clothing in house, contracts manufacturers that adhere to a strict code of manufacturing ethics and distributes and sells the clothing through its direct sales team;
· It’s the largest direct selling childrenswear retailer in Canada;
· Board members include former Kit and Ace and Lululemon executives;
· Direct sales is a $36 billion industry in the USA, 90% sellers are women and 75% are educated up to university;
· Currently, its revenue is 75% from British Columbia and Alberta, 20% from eastern Canada and only 5% from the USA;
· US stylist recruitment is outpacing Canadian stylist recruitment; and
· Its main pitch is that the direct sales model is a serious retail disrupter that doesn’t have the high cost infrastructure of traditional bricks and mortar stores. It can grow and scale quickly at a low cost.
Peekaboo Beans is definitely marketing its clothing to families that are willing to pay a premium for locally designed, high quality, premium clothing. There is no question the clothing is excellent but the issue is how many families are willing to pay significantly higher for kids clothing when there are so many other cheaper options (Joe Fresh, second hand stores, Zara, H&M, etc.). I personally would love to buy this clothing but not sure I could justify the cost unless it was secondhand or for a special occasion.
What is Peekaboo Beans’ stock doing?
As Peekaboo Beans is a newly public company, not a great deal may be able to be gleaned from the analysis. Without a track record or anything for comparison, it can be difficult to make an informed assessment. However, this is the positive and the negative with penny stocks! Those getting in early are taking a risk as to how the company will do in the future. Also, as this company is still so small and relatively unknown, there was not a great deal of analysis available online so many of the ratios below are not completed as they normally would be for the other stocks on the site.
As at January 3, 2018, the numbers from our basic stock evaluation tools are as follows:
Share price: $0.57 CAD
One share of Peekaboo Beans will cost $0.57 CAD. The price over the past 52 weeks has ranged from $0.85 CAD to $0.50 CAD.
Price to Earnings (P/E): Data not available
Recall this is the stock price divided by the earnings per share. If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued. Data requirements were not met for a score on this ratio.
Dividend Yield: --
Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares. Dividend payouts are discretionary. Dividend yield represents the amount the company pays out in dividends relative to its share price. While a higher dividend yield is usually more desirable, you still need to consider the health of the underlying company before making a generalization either way. Here, not surprisingly, Peekaboo Beans is not paying a dividend as of yet.
Earnings per Share (EPS): -$2.66 TTM
This figure will tell you a great deal about the growth of the company. It takes what the company earns and divides it by the number of shares outstanding. It is essentially the profit allocated to each share of the company. The bigger the number the better because the more the company earns, the more attractive it is to investors. EPS that is increasing every quarter shows earnings momentum and shows growth potential. Peekaboo Beans has a negative EPS at this stage.
Revenue: $4 million
Increasing revenue is a good sign that the company is growing. No further was available at this stage.
Return on Equity (ROE): Data not available.
ROE tells you what sort of return the company is getting on the shareholders money. An increasing ROE is a good sign.
Market Capitalization: $7 Million
This indicates Peekaboo Beans is a very small cap stock. Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies.
Net Profit Margin: -72%
This ratio tells us what profit is left over after the company pays its expenses for the year. The more money it keeps, the better. High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down. It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin. Peekaboo Beans has a considerably low NPM in this instance.
Cash Flow per Share: Data not available
Recall that this number is the cash flow through the business divided by the number of shares outstanding. It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio because it is more difficult to manipulate cash flow numbers than it is earnings numbers. A higher value usually indicates the company is in a healthier position.
This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures. If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance. It is also wise to look at a company’s cash flow picture in the long term as that should take into account one time, large capital expenditures (money spent by a company to buy or maintain an asset like land, buildings or equipment, ie. “fixed assets”) that required large amounts of cash.
Price to Sales (P/S): Data not available
This ratio compares the total market value of the company with its sales revenues. There is not a great deal of manipulation a company can do with its sales data so this can be a good indicator of how well the company is doing. Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity.
Price to Book (P/B): 11.83
This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. It is the value of the stock in comparison to the underlying assets of the company. Thus, a low P/B relative to the stock price suggests you are not paying too much for what would be leftover if the company went bankrupt for example. Peekaboo Beans has a decent P/B.
Price to Cash Flow (P/CF): Data not available
Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company. Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price.
This completes a basic evaluation of Peekaboo Beans. Given it is so new to the stock market and largely unknown, it does not have any analysts assigned to cover it. Therefore, the data available was lacking. It would be best to circle back on this stock in the next year to see if further data is available. I like the clothing, I like the mission and I like who is on the Board of Directors (former Kit and Ace and Lululemon execs), however I think I need more information and research on the long term profitability of direct sales companies.
**Top photo courtesy of Florian Klauer on Unsplash