[$OG] Organic Garage Stock Analysis & Insights
Why I like the Company Organic Garage and my brief insight on the company
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Welcome to Momentous Insights where we
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To get outsized returns in the irrational stock market it all balls down to two of my favorite quotes by Thomas Phelps & Benjamin Graham which is 👇🏾👇🏾👇🏾
To make money in stocks you must have the vision to see them, the courage to buy them and the patience to hold them. Patience is the rarest of the three. -Thomas Phelps
The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists. - Ben Graham
You will see those quotes very often in my insightful docs because it's so true. Ok now on to the doc.. My goal is to find unjustified pessimism which leads to value and have the patience to hold that value unless the facts change. So that is what I'll focus on. Today I will try to explain the value i found in roughly 10 min. My name is Mya Parker and I’m a 14 year old investor, financial youtuber, enthusiastic gardener, and Christian, amongst other things but not a financial advisor.
Although really when it comes to investing, “I’m just a studier of history and a speculator of the future based on history.” - Mya Parker.
This is momentous insights and today I will give you my insight on the company Organic Garage $OG $OGGFF
Insightful Diligence
Problems
This can be summed up to one simple equation:
Whole Foods = Whole Paycheck
Solutions
The solution to getting prices down on healthy, natural, and organic foods, can best be done by eliminating unnecessary costs that don’t affect the quality of the products negatively and also not affect the customer experience negatively. Organic Garage has the solution to getting cheaper cost and better value and they do it primarily by the 3 ways listed below:
Simplified Labor Model / Everything is Grab & Go
Smaller Retail Locations [12K-15K square feet]
Highly Rationalized SKU base
The reason for the simplified labor model is they noticed customers were changing from a KNOWLEDGE based requirement to a PRICE based requirement. The consumers essentially don’t ask what is quinoa etc. but that transitioned to where is your quinoa, what brands do they carry, and what is their price. So, by eliminating the dietician, specialists, service departments, and kitchen on site they are able to pass those savings onto the shelf price of the natural, organic, and healthy products.
The reason for smaller retail locations & a highly rationalized SKU base is similar to why Sprouts Farmers Market $SFM started to implement this which is because when you focus on what sells you are reducing costs because you are not wasting sq footage, infrastructure, time, overhead costs, etc. on things that don’t sell.
With all those reduced costs they are able to pass the lower costs down to their products shelf price and also price is a factor in value so it also provides lots of value for their customers that they can’t find elsewhere (More on this soon)
…Which should lead to more loyalty and more health enthusiasts or people who want to be more healthy going to their stores rather than whole paycheck foods.
But just like $SSTI ShotSpotter which i did an in depth analysis on previously this company is selling outcomes not anything else
Here’s what the outcomes translates too in more of a math format:
18%-24% savings compared to an whole foods
12%-15% savings on a basket compared to competing health food stores
and 8%-12% savings on a basket compared to national grocery chains
... and if you want me too translate it once again here it is:
Organic Garage is more like a Whole Foods without the Whole Paycheck rather than Whole Foods & Whole Paycheck
Also for the consumer that is online they have a direct to consumer solution as well which could be as high as 20% of their sales this year.
Though Organic Garage offers 8,000-10,000 SKU’s, they also have a program called the Hand Pick Partner Program which:
Introduces new products to their customers that they may not offer but also allows the newer company to get access to traffic and test out their product in a brick and mortar format
Organic Garage gets a combination of a percentage of their sales & a fixed rent based on the square footage they occupy
Organic Garage is also able to somewhat collect data on emerging organic & better options to see what works and potentially acquire them early on while generating revenue directly from them in the Hand Pick Partner Program
This Hand Pick Partner Program goes straight to the bottom line and is a net profit for this company
This all allows for one stop shopping.
Most recently they also addressed another problem of providing great products in the dairy space. They acquired The Future of Cheese (Feb 23rd 2021) which is a wholly owned but independently functioning subsidiary of Organic Garage, and is led by two superstars of the industry Craig Harding & Mr.Affirm Pristine, which are two influencers that have appeared on major TV stations & shows but also have years of experience, reputation, & great connections.
So Organic Garage now has 2 disruptive products in the dairy space which is:
cheese
butter
…and this is in the plant based sub sector which is expected only to grow from here. Mimics the alternative product well. And i believe the management said is easier to transport. This is also great timing with the plant based trend.
Competitors
Since Organic Garage is the main business & really The Future of Cheese right now is a cherry on top and very disruptive product I will focus on Organic Garage competitors.
First of All there isn’t many known to me but here a few i was able to find Wild Oats Marketplace, Luckys Market, Choices Markets, Akin's. Many of these you may have not heard of because of the scale of which they operate & or the fact that some of them, they’re in canada.
As far as competitors goes note that in the broader grocery segment it will always be competitive and consumers are known not to be loyal but i believe that Organic Garage has the management & moat to accomplish what they need to accomplish for this to be a great investment today.
Management
“I prefer to sail in a bad ship with a good captain rather than sail in a good ship with a bad captain.” - Mehmet Murat ildan
So obviously a ship is of no use without a good captain and at the end of the day the team you build is the company you build. So analyzing management is important and one of the determining factors if I buy a company or not so we will deter from the previous a little bit to stop and analyze management. The CEO Matt Lurie is good, communicates in easy to understand terms showing his competence and intelligence just like the other CEOs ive mentioned. Somewhat seems to have a passion for what he does which I came to a conclusion to after learning he’s a fourth generation grocer, highly experienced food retailer, hand on operator and manager, and passionate & entrepreneurial. He also is very straightforward and i guess very entrepreneurial like & professional as he seems to show no emotions in interviews (just personality) also he praises others a lot and other things which symbolize humility and his hard work symbolizes extreme will; these two paradoxical mix of things together symbolize a Level 5 Leader. Examples of Level 5 Leaders include Bill Gates, Elon Musk, Mark Frohnmayer, Galileo Russell, Zachary Cox etc. Here's something also to note about him, he owns about 13.73% of Organic Garage and insiders all together own about 15.6% of Organic Garage according to simply wall st. Also for more information on the amazing leadership at the company just research it yourself using various reputable sources such as linkedin and the investor relations page etc.
Traction
Organic Garage was founded 2005 by a 4th Generation Grocer (Matt Lurie) Headquartered in Toronto Canada. This is where they are now:
Organic Garage has 4 stores and one on the way.
The CEO of Organic Garage says that they intend to grow to as many as 20-25 total stores in Ontario alone, with an eye on the 1 BILLION Ontario organic food market
Although still expanding the Direct to Consumer segment of their business where revenue % could climb to as high as 20% in 2021 alone
Working Capital of about $1M
EBITDA $2.8M
Sales Increased 25.3%
Acquired Future of Cheese
P/B of 4.3
P/S of 0.77
EV/Revenue 0.88
EV/EBITDA 7.7
EV of 26.63M
6% Operating Margin
6.56% ROA (ttm)
30.28M Revenue (ttm)
EBITDA 3.46M
Gross Profit 8.62M
22.62% Gross Margin
Also now implementing decentralized Distribution Center which will give them 1M in saving annually and this goes straight to the bottom line
Lastly they now have 2 disruptive products outside of Organic Garage which is Plant Based Cheese & Butter
Objections
Pitti the Pessimist: Not every company is a great investment
Mya the Optimist: I agree but i also believe everything has a value at a certain price and this is no different
This company is growing massively and has a P/S below 1 which is crazy compared on a relative valuation and the fact their gross margins are really good for the savings they pass on & revenue growing High Double Digits as a grocer and offer better value to their consumers is crazy. Look at this company and its cheap and we haven’t even mentioned their recent acquisition of The Future of Cheese which will be a growth of value beast.
Pitti the Pessimist: Ok if the company is so sound then why is no one buying the undervalued company?
Mya the Optimist: The company is similar to many companies in the microcap space that are undervalued until they are discovered. The goal of every microcap investor is to find those hidden gems before larger pockets including institutional investors.
Pitti the Pessimist: Are you even invested in this company or are you all talk and no action?
Mya the Optimist: You should take everything said in this article with a grain of salt as im not invested in $OGGFF. I was researching this over the weekend and now its Memorial Day and i couldn’t buy rn if i even wanted too. Also im not a financial advisor.
Perfection is just a direction - Elayne Quirin
Do remember perfection is just a direction and i don't buy or sell stocks bc of relative or absolute valuations.. I use this as guidance nothing more nothing less.
What i Believe & What I’m Doing
Personally I am not buying until i get more capital. Although i think it offers GREAT, TREMENDOUS, VALUE at this price.
Thankyou for reading. Hopefully you found this as insightful, if you did follow me on Twitter, Discord, and YouTube for more!
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