| Summary | Score | MOS | Share Price | Sticker Price |
|---|---|---|---|---|
| On Sale | 17/20 | 70% | $185 | $640 |
Summary: OVERPRICED
Score: 8/20
MOS: 1%
Share Price: $.65
Sticker Price: $.66
Is Naked Brand Group stock a good buy?
Naked Brand Group is an apparel company founded in 1946 and headquartered in New York, NY. They are essentially a holding company with brands including Naked, Davenport, Evollove, Fayreform, Hickory, Lovable, and more. Their products are available in 44 countries worldwide through 6,000 retail companies including Macy’s, Nordstrom, and Amazon.
Without diving too far into the business model, there is one big issue with the stock which is the share price. Any stock that’s less than $5 (USD) is classified as a penny stock and 99.9% of stocks that fall less than $5, never break out past $5. And keep in mind, 90% of stocks that fall between $5 and $10, never go higher than $10. Some investors believe you can “get in early” and capitalize on big returns as the stock takes off but that is rarely the case.
Penny stocks are essentially businesses that have run out of ways to raise funds. Bank lending has slowed down or completely stopped, venture capitalists have lost interest, and even private equity laughs them out the door. So how do businesses like this raise more capital? The simple answer is to go public. Unfortunately, most retail investors don’t realize these businesses typically have horrible income statements, cash flow statements, and balance sheets. If you’ve seen the movie, The Wolf of Wall Street, you may remember Leo DiCaprio’s character calling these stocks complete garbage, except he didn’t use the word “garbage.”
Here is what the news has to say.
This article from Yahoo Finance states that Gildan Activewear is a top competitor and a much more attractive investment. Gildan’s share price increased by 156% over the last year while Naked’s share price increased by 8%.
This article from The Motley Fool provides reasoning on why the share price surged in April. This was due to the shareholder approval to sell the Bendon subsidiary. This vote paved the way for the company to become a fully eCommerce-based business.
Events like the sale (or acquisition) of an entity can appear exciting and attract “traders” who are looking for a quick buck but the risk of losing money is much greater than the opportunity to make money. That’s why Tykr is focused on safe, conservative, and mostly boring companies with great financials that are expected to make you money over years through the power of compound interest.
Remember, it’s not “Timing the Market” it’s “Time in the Market”. In other words, don’t try to time your entry and exit positions. Investing is more about finding great businesses and then buying MORE SHARES over time.
One of my favorite investing-related articles is about Ronald Read, a janitor who built up an $8M stock portfolio. You may ask how is this possible? The answer is he just kept buying individual stocks. Some of his long-time holdings were Proctor & Gamble, JP Morgan Chase, and General Electric. Read would hold those stocks and buy more (stockpile) as the market went down. Overall, it’s not hard to build wealth in the stock market. You just have to be in the market, be patient, and focus on the long-term.
Stocks like NAKD can be perceived as “Shiny Objects” and pull our attention away from wise investments. Be careful and remember to check Tykr to see if the financials are weak or strong.
Here is a closer look at the financials. Naked Brand Group released its 2021 fiscal report on January 31, 2021.
Currency in NZD.
Revenue (Found on the Income Statement)
2018: $131M
2019: $11M
2020: $90M
2021: $80M
Revenues continue to decline.
Net Income (Found on the Income Statement)
2018: -$37M
2019: -49M
2020: -$54M
2021: -68M
Net income also continues to decline.
EPS (Found on the Income Statement)
2018: -163
2019: -201
2020: -34
2021: -.62
EPS has improved but still in the negative.
Free Cash Flow (Found on the Cash Flow Statement)
2018: -$6M
2019: -$12M
2020: -$21M
2021: -$12M
Free Cash Flow has improved but also still in the negative.
Total Assets (Found on the Balance Sheet)
2018: $88M
2019: $75M
2020: $88M
2021: $159M
Total Assets have increased which is a good sign.
Total Liabilities (Found on the Balance Sheet)
2018: $93M
2019: $65M
2020: $94M
2021: $70M
Total Liabilities have decreased which is a good sign.
Total Debt (Found on the Balance Sheet)
2018: $52M
2019: $20M
2020: $38M
2021: $17M
Total Debt has improved.
Total Equity (Found on the Balance Sheet)
2018: -$5M
2019: $10M
2020: -$6M
2021: $89M
Total Equity has increased significantly. The overall balance sheet doesn’t look too bad.
With a Score of 8/20 and a MOS of 1%, this stock is too risky. On top of that, the share price of $.65 is the red flag. The chances of this stock making investors any money in the long term are extremely low.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.