Analyst Siddharth Rajeev of Fundamental Research Corp. (“FRC”) recently reaffirmed the firm’s Buy rating on Laguna Blends, Inc. (CSE: LAG) (OTC: LAGBF) (LB6A.F), citing an increase in the company’s share price as well as improved revenue and its entrance into the lucrative skin care industry.
Read the full report here http://nnw.fm/G8XvK
Laguna Blends is a network marketing company focused on the generation of sales through a growing base of independent affiliates. In March of 2016, the company launched sales of its Caffe and Pro369 beverage products, marketing the products through a base of 135 affiliates in North America.
As noted in the reports, sales quickly took off, and by March 31, 2016 – Laguna’s fiscal fourth quarter – the company generated its first revenues of $17,000. As of its first fiscal quarter ended June 30, 2016, Laguna reported revenues of $47,000. In addition, the company’s affiliate network grew to 300 active affiliates.
While Laguna’s primary focus has centered on its hemp-based functional beverages, the company recently entered into a two-year, exclusive marketing agreement for the distribution of seven Swiss-made cannabinol (“CBD”) skin care products.
In clinical trials, the skin care products reportedly showed visible results within one week. In the report, Rajeev provides a summary of the skin care line, as well as results from the clinical trial and several benefits to Laguna’s decision to diversify its portfolio.
“Laguna’s focus is on daily consumable products and their strategy is to build a portfolio of diversified suite of products like larger MLM companies,” reads the report. “Most of the larger players sell a wide array of products including cosmetics, personal care, food and beverage, kitchenware and appliances, home care, wellness, electronics, etc. We believe that moving into skin care products was an obvious choice for Laguna. … Another reason for Laguna to enter the skincare market is that unique and niche products tend to do well with direct sales as they require person-to person product education and higher levels of customer service.”
After discussing Laguna’s functional beverage products, the report delves into the differences between MLM companies and “pyramid schemes,” and how Herbalife Ltd.’s (NYSE: HLF) $200 million settlement with the Federal Trade Commission helped influence the call for proper affiliate compensation.
The report also highlights the “success story” of Immunotec, Inc. (OTC: IMMTF), which offers nutritional products through independent consultants and whose performance has bucked the negative stigmas of MLM companies.
Marketing its products to Mexico, the U.S. and Canada, Immunotec grew annual revenues to $85 million in 2015, up from $40 million in 2010. For the first half of 2016, the company reported 28% year-over-year revenue growth.
“We believe the negative sentiment on MLM companies offers investors attractive opportunities to invest in well managed and growing MLM companies,” writes Rajeev.
Based on Laguna’s new skin care line and growing affiliate network, FRC raised its long-term forecasts on the company, now projecting that by the year 2020 the company will turn a profit of $3.3 million, or EPS of $0.12, on revenues of $38.3 million, and grow its number of affiliates to 30,000, among other forecasts.
In conclusion, Rajeev writes that “The average of our Discounted Cash Flow (“DCF”) and comparables valuation models increased from $0.44 per share to $0.80 per share. Details of our valuation models are presented in our initiating report, dated May 5, 2016. We are maintaining our BUY rating and risk rating of 4.”
Shares of Laguna have increased 83% since FRC initiated coverage on the company on May 5, 2016.
For more information, visit www.lagunablends.com
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