I’m big on organic food and health. As government debt increases, my generation and future generations will have to pay more in taxes in order to receive the same amount of healthcare today. This is a reason why my generation, and younger ones, are taking care of their health. Organic foods is one thing, but so are vitamins and supplements. Organic Garage is a stock that I want to like, but there are some caveats here.
Firstly, I live near the Langley/South Surrey side of the Lower Mainland in BC. There are a lot of organic food stores here. Nature Fare’s Markets is a place where I regularly shopped. I still have a membership, but I just haven’t driven to the location. I remember buying a sandwich from the deli. Well a veggie sandwich and a fresh pressed juice. The sandwich bread was the same size of the wonder bread slices. It had some cheese, lettuce, tomato and sauce. I would grab one and a juice and head over next door to play some Warhammer 40,000 (all glory to the T’au Empire). Other gamers would ask me how much I paid. Total came to near 15 bucks. They would then tell me it was a rip off and I could have saved money buying McDonalds or Subway. That was my first experience advocating the organic food mark up.
These stores see a lot of business. The trend for healthy organic foods is hot. I don’t think it will be going anywhere anytime soon. People are willing to pay a few dollars more for organic. Health is wealth. The amount of money I have spent on supplements and vitamins in the past few years, and continue to do so today, would cause people to faint.
As you can see, Organic Garage has locations in Ontario. Five stores currently, with two more stores opening. They are looking to expand. Many people are saying they should expand to the States and even the West Coast of Canada. Trust me, the West Coast would be huge, but there are already tons of organic food stores here. What matters is how Organic Garage distinguishes themselves from the rest. I haven’t been to a location, but check out our Organic Garage Roundtable on Youtube where Rob discusses his experiences shopping at Organic Garage!
Another issues with the expansion to other areas would be the costs. I bet they save a lot on supply chains and transporting with the core stores close to each other.
One of my long term investing mantra’s is to invest in places where you spend money on a regular basis. Grocery stores tend to be up high on the list. I own shares of Loblaw’s for the long term. Every month I keep adding. It isn’t sexy, but I know people will keep buying groceries and they pay a dividend. A nice value play. If you are someone who shops at Organic Garage regularly, I would consider doing the same…but of course there isn’t the nice dividend as of yet.
The reason I stopped shopping at Nature’s Fare is because more organic food stores opened closer to me. Also Superstore, and other grocery chains, are getting in a lot of organic foods. In the case of Superstore, they even have two whole aisles dedicated to organic foods INCLUDING an aisle for vitamins and supplements. If I can’t find them there, I just pick them up on Amazon, but more often than not, I just go to a local supplement store to help keep small business’ propped. There isn’t a short supply of those around me neither. Costco is also known for its organic foods now. I guess some would say that these companies just label things organic to mark up prices a buck or two. Organic Garage takes this to a new level with their “dump it” list,
Future catalysts are expansion, but in order to distinguish themselves, Chris Parry mentioned cheese in our Organic Garage Roundtable Youtube discussion. The earnings are promising:
Organic Garage’s year end financials also showed promising growth. In their fiscal year ending on January 31, 2021, they had $30.3 million in sales, compared to the FY ending on January 31, 2020, where their sales totalled $24.1 million. OG’s 25.3% sales increase led to a 33.2% increase in gross profit dollars, which went from $6.7 million to $8.9 million. While Organic Garage still ended up with a net loss on the year, it was only $263,322, which is far lower than the more than $5 million loss they ran up the year before. OG’s EBIDTAwas $2.8 million compared to a loss of $1.8 million.
Technical Tactics
According to Marketwatch, Organic Garage stock is down -28.87% year to date (Jan.1st 2021 to today), but is up 283% on a 1 year timeline (from August of 2020 to today). The company also has a market cap of $20 million (for 5 stores).
Be sure to read TK’s financial piece outlining what he sees on the financial statements, and what he values each location at when it comes to expansion and profitability.
The stock has a story, but share prices ran up too fast in a short amount of time. I suspect a lot of bag holders at higher prices. If they want to get out at break even, the stock may see some selling pressure on pushes higher.
Technically, we have some positives. For the past few weeks, the stock has been ranging between $0.305-$0.375. This is a good sign. It indicates we might be building a bottom, and the trend could be about to reverse. The shift above the moving averages is a positive sign. If we can get a daily candle close above $0.375, with some nice volume, we have a breakout and should expect further momentum higher. Momentum which takes us to the $0.55 zone. It gets REAL interesting if this breakout occurs.
If we do not break out, we either continue to range, or break below $0.30. A breakdown would take us lower to around the $0.20, which is a major flip zone (an area where price has been both support and resistance in the past).
Technicals are interesting, and I love the business and the future trend. I am just worried about the competition that is out there. But in a sense, this would be a way to play a pure organic retail company.
