Mama Mancini's
Q1 2020
Symbol: MMMB (OTC)
Share Price: US$1,66
Market Cap: US$53 Million
By Manuel Maurício
June 16, 2020
Mama Mancini's: Share Price History
Source: Google
Update
Mama Mancini’s is our micro meatball company. You can read about it HERE. The first quarter results were out yesterday. The American crowd doesn’t like to cook so they prefer to buy their food already cooked. With this lockdown thing going on, the company was able to reach many more new clients and have a blowout quarter. I was expecting revenue of $10,7 Million and the company posted $11,1 Million, growing 51% from a year ago.
Mama Mancini's: Q1 Income Statement
Source: Company press release
Not only that, but we’re already seeing the improvements from bringing aboard the consultancy company to streamline production. The gross margin went from 32% to 34%.
And due to the operating leverage allowed by the fixed cost structure of maintaining a plant while ramping up production, the net income went up by 154%. This also translated into higher cash generation of $1,2 Million, which together with the much lower Capital Expenditures (CAPEX) has led to a record Free-Cash Flow (FCF) of $1,1 Million.
Mama Mancini's: Q1 Cash Flow Statement
Source: Company press release
All this cash generation has enable the management to pay down some debt – as expected – and still be left with $1,8 Million in the bank (from $0,4 Million a year ago). This quarter was so good that the company has even returned the cash it received from the Government which was intended to help pay the salaries.
Mama Mancini's: Q1 Balance Sheet
Source: Company press release
Right now, the company is valued at less than 13x earnings (2020) while growing at 51%. Everything seems to be going well and if the company is able to keep this rhythm, I don’t see how the multiple doesn’t expand. This company is clearly undervalued. I’m still confident and my base case points to a 22% rate of return over the next 5 years.
Mama Mancini’s will be kept in the Portfolio until the story changes or until its valuation gets so high that the expected return ceases to be appealing.
Mama Mancini's: Valuation
Source: Author's estimates
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