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Revision History For: Smart Balance (SMBL) A smart and balanced investment!

08 Apr 2008 04:15 PM <--

Return to Smart Balance (SMBL) A smart and balanced investment!
 
Would it be SMART to invest in this company? On BALANCE I think it has merit! The company is Smart Balance (SMBL) currently trading at $8.00 a share! I own a few shares with my entry price just below this current price.

Company Profile: Smart Balance, Inc. distributes a line of heart healthy and low fat food products in the United States. Its products under the Smart Balance brand include buttery spread, light buttery spread, light buttery spread with flax oil, Omega Plus buttery spread, popcorn, bottled oil, Buttery Burst cooking spray with organic soy, shortening and aerosol cooking spray, omega peanut butter, light mayonnaise, and Omega oatmeal. The company also provides various products under the Earth Balance brand, including whipped spread, margarine natural buttery spread, and natural buttery spread. In addition, its other products comprise cheese shreds and creamy cheddar-flavor slices under the brand Smart Balance; and natural buttery sticks and shortening sticks under Earth Balance brand. Smart Balance offers its products primarily through territorial food brokers, supermarket chains, military commissionaires, and other distributors.

Positive Considerations:
1) Major reorganization and funding deal accomplished last year, giving them needed operating capital and reduced debt load.
2) With enhanced product line and funding for national advertising program 2007 revenues jumped 27.7% to $175,562,000 vs. $137,404,000.00.
3) 2008 management projection is to produce another 30% growth in revenues and this should continue for the next couple years.
4) Current Book Value (BV) is $5.48 so stock is trading less than 2x (BV).
5) Insider ownership is nearly 30%, and it is strictly my opinion that at some point they will be willingly sellers of the company. Oscar Shaefer’s OSS Capital Management owns nearly 6 million shares, and he isn’t a pacifist investor.
6) Institutional and Mutual Fund ownership of share float is about 67%.
7) Recent negative information about Vytorin and Zetia could be a positive for product line. Without this being a factor it is my opinion that with baby-boomers, health concerns will become more and more of an issue. (SMBL) product line should benefit from this issue.
8) With the down turn in the economy I was concerned that this might not be a low-end shopping product line, however, I was surprised to find that Wal-Mart is their biggest account with them representing nearly 20% of their sales.
9) With growing product line and national advertising campaign I see a more diverse retailing source for their products. The key to grocery chains is getting shelf space and advertising to draw customer attention. As I did, would suggest everyone to check their local grocery store to see product display and if the product is moving off the shelf. One visit will not do it, as the shelf could be filled as it had just been restocked.
10) Revenue for 2007--$175.5
11) Revenue Projections for 2008--$233.9 or 33%
12) Revenue Projections for 2009 --$326.1 or 39.4%

Negative Considerations:
1) Must increase product line to enhance opportunity for retail space justification and advertising leverage.
2) Technology patent for product developed is licensed from Brandeis University and is set to expire in 2013.
3) Healthy heart products must continue to be an option for healthy living for aging population and not just another fad.
4) To this point in their history the company has been unprofitable; however, if projections are reached this year they should turn a profit in 2008, and maybe triple profits in 2009.

Smart Balance will not be an overnight wonder, and thus not a short-term investment. However, if management that is now in place can hit their goals, with the stock trading for less than 2x Book Value and revenues growing at 30% a year for next few years…..share price is a bargain at $8.00.