New Age Beverages (NASDAQ:NBEV) stock is a loser. NBEV stock is down 73% from its peak this February and off over 74% from its 52-week high.
The CEO, Brent Willis, consistently sells portions of his shares each month. Furthermore, this company, including its recently added multi-level marketing company Morinda, is losing money and it is getting deeper into net debt.
That should tell you everything you need to know about NBEV stock to make a decision to invest. But wait, there’s more! NBEV has consistently delayed its rollout of CBD drinks, missed numerous guidance estimates that it gave out, and displayed poor management decision-making.
That is the judgment of several analysts in Seeking Alpha that have written articles about New Age Beverages stock. Most of them have presciently predicted the fall of the stock. One author even believes the stock is only worth $1.57 per share, which is over 21% lower than today’s price for NBEV stock.
Focus on the Cash
New Age Beverages is running a huge operating cash flow deficit. That loss necessitates further borrowing, equity raises and/or asset sales each quarter.
For example, in the latest 10-Q filing by NBEV, the operating cash flow loss for the nine months ending September 30, was $20.9 million. In addition, its free cash flow, after capex spending and a security deposit requirement, was negative $25.3 million.
Keep in mind this is a company whose market value is just $154 million. So it can’t really afford to keep on having these kinds of losses. It won’t be able to finance a drain in cash flow like this each year.
NBEV financed these losses by selling a large asset for $35.8 million. But it can’t keep on doing this. In fact, NBEV sold shares to the public for $13.5 million during the first nine months of 2019. It likely won’t be able to do this again as well, with NBEV stock down so much.
Deep in Debt
New Age Beverages has $68 million in cash as of September. But it has $24.2 million in long term debt, up from $7.4 in debt at the beginning of 2019.
In addition, NBEV has huge operating and deferred lease liabilities. These liabilities now total $52.2 million. So now NBEV has $76.4 million in debt and long-term liabilities. This is up from $18.4 million at the beginning of 2019.
In effect, NBEV now has net debt and long-term liabilities of $8.4 million. This is a complete reversal from the start of 2019 when New Age Beverages had net cash of $24.1 million.
That’s what running continuing cash flow losses will do to your company. Your net cash balance turns into a net debt balance.
Frankly, it’s another sign of a loser company.
The Botto Line on NBEV Stock
The reality is that a lot of short-sellers in this stock is probably looking to cover their short sales. Yahoo! Finance reports that 28% of the shares outstanding are held by short-sellers. It also says that 30.5% of the float (i.e., shares not held by insiders) is short.
What that will probably mean is that when a number of short-sellers start to cover their short bets they will force others into the same trade, pushing up the stock. So don’t be surprised to see a sudden spike in New Age Beverages stock.
But that should not be a sign to get into the stock, as if its outlook has somehow turned around. I would avoid this loser no matter what happens to the NBEV stock price.
I have shown that at best the company is on speculative grounds financially. That is not the kind of defensive, margin-of-safety stock that leads to higher values for most investors.
As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. The Guide focuses on high total yield value stocks. Subscribers a two-week free trial.