Vaporin, Inc. (VAPO) Goes Head to Head with the “Big Boys”
Vaporin, Inc (VAPO) has taken on the “Blu” brand strategy of quickly becoming a “first to market”, recognizable brand through national distribution and a novel online sales strategy. It’s no secret that Big Tobacco has focused on the e-cig space but the facts support a much different twist to the “electronic smoking” landscape which has actually taken a turn in the direction of vaporizer use and e-liquids compared to the e-cig. No doubt there will be some overhang within both sectors but in my opinion, the new trend is headed in the opposite direction of what companies like Reynolds America (RA) and Altria Group (MO) have dumped millions and even billions of dollars into.
Currently in the vaporizer space, there are many players but when you start to pick apart the financials, the true tale of the tape becomes clearer. For VAPO, this past Friday’s quarterly filing for Q2 of 2014 shows some impressive growth numbers especially after just recently going through a name and symbol change. Currently VAPO has a market value of $10,402,505* and has posted revenue growth of more than 100% quarter over quarter this year.
In its March SEC 10Q, Vaporin reported revenues of roughly $183k and gross margin of $67k. For the second quarter, Vaporin recorded revenues of $419,370 and gross margin of $181,015. This was an increase in both revenues and gross margin of 129% and 170% respectively meanwhile the cost of sales as a percentage of revenues decreased by 6% from 63% (@$115k) in Q1 compared to 57% (@$238k) in Q2…In other words gross profit margins increased from 37% to 43% Quarter over Quarter.
But if you really want to talk hard numbers here, let’s look at another company that’s entered into the space with a product that also boasts a similar ability to heat dry herbs and e-liquids, mCig, Inc. (MCIG). At its current state, MCIG holds a market cap of $117.5M* and has just recently announced results of its operations with expected numbers “soon to be filed” in its annual report. To the defense of MCIG, they state that the following results are “really from the first 105 days” of the year following the initial launch of their mCig, Vapolution, and VitaCig brands.
The Company expects to report approximately $543,000 in company-wide pro-forma** revenue. This compares with roughly $50,000 in the prior-year ended April 30, 2013 and represents an approximate 1,100% increase…now keep in mind, the company notes that these numbers are after the vape products were launched so to really say that this was the increase is a bit skewed in my opinion. If the products weren’t there a year ago, how can you really compare sales figures and revenue numbers appropriately? In addition to this, mCig expects to report approximately $1,900,000 in shareholders equity.
Taking a step back and comparing some numbers here, it would seem that though there is a larger market cap and share price for mCig, Vaporin is right in line financially, based on revenues and shareholders equity which truly hits home the point of the company’s overall potential within the vaporizer and e-cig space. This is in addition to how potentially undervalued VAPO really is at these levels.
So let’s break this down and say for instance that Vaporin’s true roll-out didn’t really kick in until Q2 of this year; in fact the company just revamped the retail website this past week. Based on this we’ve got the base of comparison in my opinion. mCig (at more than 10 times the market value) boasts $543k in revs and $1.9M in shareholders equity compared to Vaporin’s $419k in revs and $1.93M in shareholders equity. All things considered, VAPO isn’t that far off the mark and has nearly matched the performance of a seemingly much larger company.
With the roll-out of the company’s new website, posting increased revs quarter over quarter, decreasing cost of sales, and increasing shareholders equity by nearly 6 times compared to first quarter results, Vaporin may not only be undervalued but it could also be quickly gaining ground by becoming the market leader in the vaporizer & e-liquids industry and we think it should be worth a closer look.
*As of August 8, 2014
**The Company cautions investors that the measures “Adjusted Profit” and “Pro-Forma” reflect non-GAAP (Generally Accepted Accounting Principles) measures. mCig presents these measures because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. mCig believes that the non-GAAP financial measure of Adjusted Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information.