I looked at MWK as well - even several times as it kept pretty well in recent sell off. I’m struggling to invest into it for the following reasons:
- Low gross margins
- Acquisition based business model. If I understand correctly they don’t even break down organic and non-organic growth as they are constantly acquiring new products. Their old products will finance purchase of new products/brands etc etc. Perhaps I’m just not used to this business model.
- Their long-term business model says contribution margin 18-20% is not far from the current 13-14%, meaning that not much upside left from margin improvement. Long-term EBITDA 13-15% which is relatively low.
I’m not saying it’s a bad company or each of those points kills a bull case per se. It’s a combination of these and other factors like this is a CPG company in a low margin business with probably hundreds competitors etc make me feel unease investing here. And we also have to compare each investment opportunity with other opportunities and decide on which will produce better results.
Those who invested in MWK in late 2020 or early 2021 made good returns, even very good returns and this may continue, but I was not able to develop confidence in the business which is necessary for investment. Especially considering huge volatility in our stocks.
Anyways, wish good returns to all MWK investors from our board.
Best,
V