I’ve been looking into NGVC since Saul mentioned that hestarted a small position in the company. I like the overall concept of the company capitalizing on the healthy food movement that is just beginning in the US. I am eager to learn more about NGVC as it could be a mini Whole Foods.

I really like the fact that the company is a long time family run business with considerable insider ownership. The company has added 10, 10, and 13 stores in 2011, 2012, and 2013 and plans to add another 15 in 2014. The 15 new stores represents a 20% growth from the YE2013 store total of 72. As you can see the company has doubled its store total from 2011-2013 and is on pace to add another 50% in 2014-2015.

New stores cost $2.5 MM and have a repayment period of 4 years and thereafter the return on cash is 35%.

The company is generating free cash flow and plowing it back into the company to build out its store footprint. 1Q2014 cash flow was $5.3 MM and the company has $7.4 MM of cash and securities on its BS. Only a $0.5 MM letter of credit is outstandings on their $15 MM line of credit.

The main risk I see for the company is can they continue this accelerated growth rate of adding 15 stores a year. At an initial $2.5 MM investment that is $37.5 MM/yr, which means an average quarterly cash flow of $9.37 MM vs the most recent quarter of $5.3 MM. This represnets 77% growth in cash flow from 1Q2014. Even given new stores continually coming online, I’m not sure if 77% CF growth is attainable resulting in a cash crunch. However if NGVC can’t continue adding stores at this aggressive pace I think the stock takes a hit.

I’m going to continue looking into this company and may add more to my small position however I wanted to see if anyone has looked at this company in detail and has any advice or thoughts on the above.



Just found the following post by LeKitKat on the SA Boards.…

Still interested in people’s opinions here. LeKitKat makes a good point regarding the PE ratio being substantially higher than WFM.