Grove, Inc. (GRVI) and its subsidiaries develop, produce, market, and sell raw materials, white-label products, and end-consumer products containing the industrial hemp plant extract, Cannabidiol (CBD). It also operates an annual trade show related to the CBD industry in the United States.

On July 7, 2022, GRVI announced that its Adtech platform, Interactive Offers, has partnered with Outbrain, ZeroHedge, StreetAuthority, and InvestingDaily to expand business prospects in e-commerce and online advertising using SaaS advertising technology.

Also, on July 1, 2022, GRVI completed a strategic debt investment to fund future growth. CEO Allan Marshall stated, “The capital available through this financing will be a key component of growth in our Upexi brand aggregation strategy.”

Moreover, on May 26, 2022, GRVI launched its newest product line, Cure Mushrooms, to capitalize on the rapidly growing medicinal mushrooms and superfoods market.

GRVI has gained 10% year-to-date and 3% over the past month to close the last trading session at $4.42. However, the stock has lost 15.3% over the past year.

Here is what could shape GRVI’s performance in the near term:

Weak Financials

For its third quarter ended March 31, 2022, GRVI’s revenue came in at $10.27 million, up 61.8% year-over-year. However, its net loss came in at $52,667, compared to a net income of $966,763 in the previous period.

Moreover, its loss from operations came in at $60,499, compared to an operating income of $1.01 million in the prior-year period. Also, its EPS came in at zero, compared to $0.07 in the year-ago period.

Stretched Valuations

In terms of its forward P/S, GRVI’s 1.62x is 36.2% higher than the industry average of 1.19x. Its forward non-GAAP P/E of 63.14x is 260.6% higher than the industry average of 17.51x. In addition, its trailing-12-months EV/EBIT of 37.17x is 115.8% higher than the industry average of 17.22x.

Mixed Profit Margins

GRVI’s trailing-12-months gross profit margin of 58.53% is 76.2% higher than the industry average of 33.22%, while its trailing-twelve-months net income margin of 8.10% is 58% higher than the industry average of 5.13%.

However, its trailing-12-months EBIT margin of 4.76% is 43.3% lower than the industry average of 8.40%. Also, its trailing-12-months EBITDA margin of 9.13% is 24.8% lower than the industry average of 12.14%.

POWR Ratings Reflect Uncertainty

GRVI has an overall rating of C, equating to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

GRVI has a Quality grade of C, consistent with its mixed profit margins.

The stock has a C grade for Stability, in sync with its 24-month beta of 0.87.

In the 169-stock Medical – Pharmaceuticals industry, GRVI is ranked #55. The industry is rated F.

Click here to see the additional POWR Ratings for GRVI (Growth, Value, Sentiment, and Momentum).

View all the top stocks in the Medical – Pharmaceuticals industry here.

Bottom Line

Health and wellness company GRVI could benefit from rising health awareness worldwide. However, its bleak bottom line and stretched valuations look concerning. Hence, I think it might be wise to wait for a better entry point in the stock.

How Does Grove, Inc. (GRVI) Stack Up Against its Peers?

While GRVI has an overall POWR Rating of C, one might consider looking at its industry peers, Merck & Co., Inc. (MRK), Pfizer Inc. (PFE), and Johnson & Johnson (JNJ), which have an overall A (Strong Buy) rating, and Teva Pharmaceutical Industries Limited (TEVA), which has an overall B (Buy) rating.

GRVI shares were trading at $4.29 per share on Tuesday afternoon, down $0.13 (-2.94%). Year-to-date, GRVI has gained 6.72%, versus a -18.54% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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