GrowGeneration
GrowGeneration may not have yet become a household name, but it is a fast-emerging retail chain that profits from selling equipment and supplies for growing cannabis. It currently operates 55 stores between California and Maine. As legal restrictions on marijuana steadily loosen, GrowGeneration's potential market continues to expand rapidly.
The company expects to grow to 100 stores by 2023, and it has set a goal of operating in all 50 states. GrowGeneration also continues to expand its portfolio of private label products. These offerings can bring a level of specialization not found with the numerous other competitors in the industry. Additionally, while
Home Depot and
Lowe's also sell hydroponic products, they likely will lack the shelf space to offer GrowGeneration's level of specialization.
The company's growth certainly shows this demand. In the first quarter of 2021, record revenue of $90 million represented a 173% increase from the same quarter last year. The company also earned $6.1 million during the quarter compared with a Q1 2020 reported loss of $2.1 million. Limiting operating expense growth to 59% contributed to the positive net income.
Investors should not assume this was a one-time event. Revenue in 2020 increased 143%, and net income surged 203% from 2019 levels. Also, same-store sales rose 63% for the year, exceeding the 53% increase in Q1 2021. Furthermore, considering the company revenue growth projection of between $450 million and $470 million for 2021, the triple-digit increases should continue for the foreseeable future.
Admittedly, much of this growth happened due to share dilution as the 58.4 million basic shares outstanding far exceeds the 37.8 million available at the end of Q1 2020. Nonetheless, GrowGeneration invested the proceeds back into the company as the store count has approximately doubled since that time.
It also did not stop the stock from moving higher, as the share price has surged by just over 480% over the last 12 months. Interestingly, the P/E ratio of 180 has fallen during that period. Moreover, considering the earnings growth, that multiple may not deter investors. As increased cannabis legalization continues to fuel production, GrowGeneration will likely continue to bring growth to its long-term stockholders.
