Grocery Outlet [NASDAQ: GO] made its debut in the markets yesterday, and investor reception was positive however the stock closed below where it opened. GO went public and opened yesterday for trading at $31 and closed the day at $28.51. At the market’s close, the company had a market value of $2.44 billion, and an enterprise value of $3.51 billion. Bullish sentiment was high for this IPO because it did open up way in the green from where the IPO was done, and at some point, it was trading above $30. The chart is hard to read because it just started trading however if it starts the day above yesterday’s high of $31.50, it would be a signal of a possible continuation of the bullish sentiment in Friday trading.
GO is quite different from most of the stocks that have gone public in recent months. It is an established business, with a strong brand name, and a clearly defined revenue stream. In its SEC filings, the company describes itself as a, high growth, extreme value retailer of quality, name-brand consumables and fresh products. The company has 323 stores, and has a long history that goes all the way back to 1946. The company’s business model is pretty straightforward too. It sells branded products at discounts of up to 70%. Every store is run independently, which means that each store handles its own inventory, merchandising and other operational aspects. Since the company buys in bulk and at huge discounts, it is able to pass them to the respective stores, at a good margin.
GO has also managed to grow revenues consistently for many years, averaging sales growth rate of 4.2% since 2014. Its revenues for the financial year 2018 surpassed $2 billion, and they are growing. The company already has expansion plans, and as per its SEC filings, it has plans to open 32 new stores. It intends to grow its stores by 10% every year. With a projection of 4-year cycles for stores to repay their initial investment, long-term revenues are likely to keep growing, and that’s a positive indicator of the company’s bottom-line. Other fundamentals that are likely to support this stock going forward include its growing quarterly revenue growth (yoy) which stands at about 10%. It’s a good indicator that its top and bottom-lines are getting stronger, as it continues to expand its operations.