Investors get very emotional when it comes to their money – especially losing it. Fear of loss (and not understanding stock valuation) drives investors to sell down to bargain basement prices – prices where they could be more focused on buying, not selling. Evidence of this is the stock market’s long history of going from extreme highs to extreme lows and back again.
Investors will always have news to drive their emotions (and stock prices) to extremes. In the 1990’s, stocks of internet companies went to the stratosphere. Eventually fear drove internet stocks, including those with bright futures and those that didn’t, down to very low valuations. Investors who recognized a bargain were able to buy good stocks at excellent prices.
Today it’s the coronavirus. Investors will react with fear the same way they have for over 200 years since the stock market was founded. They will drive stocks much lower than they should, not based on knowledge or reason, but based on fear. Don’t misunderstand me – stock prices
have been very high and lower prices are appropriate. But investors will do the same thing they have always done. They will sell stocks with excellent potential down to absurdly low prices, the same way they always have due to fear and market volatility.
MWK Falls Victim to Overall Global Stock Market Sell-Off Despite Revenue Growth
A growth company now at bargain prices is Mohawk Group Holdings, Inc. (NASDAQ: MWK), a tech-based consumer goods startup. The Mohawk Group uses artificial intelligence on their proprietary ecommerce platform to get the right products in front of the right people. Using proprietary AI technology, the company can launch new products in just 6 to 8 months. That is much faster than the typical release for a new consumer packaged goods product, which still relies on old methods that take 1 to 2 years.
Mohawk’s third-party logistics network can reach over 90% of the U.S. population in one-to-two days with Prime-certified shipping. In just six years since starting operations, they have become one of the largest sellers on Amazon.
Mohawk’s technical advantage is starting to show. Sales are growing at a blistering pace. Revenue has tripled over the past three years. The company is a startup with a market capitalization of just $29 million, so they are still too small for professional fund managers to invest. That gives nimble individual investors an advantage, the opportunity to purchase a great growth stock before professionals can.
MWK Appears to Be Undervalued Based on Revenue Growth, Price-to-Sales Ratio at 0.20
On April 9, 2020, Mohawk Group released preliminary first quarter 2020 net revenue between $25.0 million and $26.0 million. This represents year-over-year growth of over 40%. The Wall Street average estimate for MWK Q1 net revenues is at $23.4 million, according to an analyst poll by Capital IQ.
A Price-to-Sales ratio between 1 and 2 is considered good, and excellent if it’s below 1. The Price-to-Sales ratio for MWK stock is at now at just 0.20! This shows investors can buy an early stage growth stock at deeply discounted prices.
During the recent fourth quarter earnings conference call, Co-Founder and CEO Yaniv Sarig discussed quarterly results and outlook. He said, “We are pleased with our fourth quarter results and our strong finish to the year. 2019 marked a year of progress on our strategic priorities that included 32 new products launched, product category expansion and the growth of our AIMEE software platform. These activities fueled top-line growth of over 56% with improved Adjusted EBITDA for the year while we also continued to invest for the future.
Looking ahead, we believe that our differentiated A.I. driven business model provides Mohawk with a tremendous amount of opportunity to grow market share in existing and new categories and to generate meaningful profitability and increased shareholder value over the long-term.”
In fiscal 2019, Mohawk reported sales of $114 million, up 35% year-over-year. They also released 32 new products in 2019. Mohawk is using AI technology to position itself at the cutting edge of the consumer packaged-goods industry.
Recently, the Financial Times released its list of the top 500 fastest growing companies in 2020. Mohawk made the list at #114. This beat out other notable major companies:
- Uber Technologies, Inc. (NYSE: UBER) ranked #144
- Tesla, Inc. (NASDAQ: TSLA) #158
- Twilio, Inc. (NYSE: TWLO) #205
- Grubhub, Inc. (NYSE: GRUB) #299
- Canada Goose (NYSE: GOOS) #310
- Netflix, Inc. (NASDAQ: NFLX) #371
Mohawk’s fast growth shows its use of technology is a fundamental advantage. No doubt Mohawk will be beating the competition for years to come. At these prices, it’s time to think about board the rocket before it takes off.
More About Mohawk Group Holdings, Inc.
Mohawk Group Holdings, Inc. and subsidiaries (“Mohawk”) is a rapidly growing technology-enabled consumer products company that uses machine learning, natural language processing, and data analytics to design, develop, market and sell products. Mohawk predominantly operates through online retail channels such as Amazon, and Walmart. Mohawk has incubated and grouped four owned and operated brands: hOme, Vremi, Xtava and RIF6. Mohawk sells products in multiple categories, including home and kitchen appliances, kitchenware, environmental appliances (i.e., dehumidifiers and air conditioners), beauty-related products and, to a lesser extent, consumer electronics. Mohawk was founded on the premise that if a company selling consumer packaged goods was founded today, it would apply artificial intelligence and machine learning, the synthesis of massive quantities of data and the use of social proof to validate high caliber product offerings as opposed to over-reliance on brand value and other traditional marketing tactics.
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