Vinco Ventures (BBIG) has come into the spotlight recently due to its short-squeeze-driven rally despite possessing weak fundamentals. Is this meme stock a buy because of its increasing popularity among retail investors? Read on to find out….
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With a $225.40 million market cap, Vinco Ventures, Inc. (BBIG) develops, markets, and sells end-to-end consumer products in North America. The company provides small appliances, kitchenware, pet care, toys, baby products, entertainment venue merchandise, and housewares to mass-market retailers and e-commerce sites.
In addition, BBIG offers the Lomotif app that allows its users to create their music videos, Cortex which provides real-time analytics for marketing spending and revenue optimization, and Non-Fungible Token that enable artists and content owners to distribute their intellectual property and digital market services for brands.
BBIG has been gaining because of the return of the meme stock craze. The stock witnessed a short-squeeze-driven rally lately based on retail investors’ interest.
Since no significant fundamental news is behind BBIG’s recent rally, the stock might fail to sustain the gains. Despite its recent rally, the stock has declined 53.6% in price over the past six months and 45.2% year-to-date to close the last trading session at $0.97. It is currently trading 84.3% below its 52-week high of $6.16, which it hit on October 15, 2021.
On the other hand, on August 19, the company announced that it had received a notice from the Listing Qualifications Department of the Nasdaq regarding its failure to comply with the requirement to timely file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, with the SEC, whose deadline was August 22, 2022.
Under Nasdaq rules, the company has 60 calendar days from receiving the notice (until October 17, 2022) to submit a plan to regain compliance with the rule.
Here is what I think could influence BBIG’s performance in the upcoming months:
Poor Financials
For the fiscal 2022 first quarter ended March 31, 2022, the company reported a loss before income taxes of $379.11 million, widening 508.9% year-over-year. The net loss attributable to BBIG worsened 497% from the prior-year period to $372.95 million, while its net loss per share from continuing operations came in at $3.05.
As of March 31, 2022, BBIG’s total liabilities were $541.71 million, compared to $271.46 million as of December 31, 2021. In addition, cash outflows from operating and investing activities came in at $42.01 million and $35.68 million, up 914.8% and 196.9% year-over-year, respectively.
Low Profitability
BBIG’s trailing-12-month gross profit margin of 11.56% is 77.1% lower than the 50.52% industry average. The stock’s trailing-12-month levered FCF margin of negative 73.60% compares to the industry average of 8.00%.
Furthermore, BBIG’s trailing-12-month ROTC and ROTA of negative 1,173.86% and 204.45% compare to the industry averages of 3.66% and 2.48%, respectively. Its trailing-12-month asset turnover ratio of 0.07% is 85.8% lower than the 0.48% industry average. Also, its trailing-12-month cash from operations of negative $85.01 million compares to the industry average of $219.25 million.
Frothy Valuation
In terms of trailing-12-month EV/Sales, BBIG is currently trading at 10.45x, 434.3% higher than the industry average of 1.96x. In addition, the stock’s trailing-12-month Price/Sales of 4.53x is 264.5% higher than the industry average of 1.24x.
POWR Ratings Reflect Bleak Prospects
BBIG has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BBIG has a grade of F for Quality, consistent with its lower-than-industry profitability metrics. Also, it has an F grade for Stability. The stock’s beta of 1.72 justifies the Stability grade.
BBIG is ranked last in the D-rated 52-stock Consumer Goods industry.
Beyond what I have stated above, we have also given BBIG grades for Sentiment, Growth, Value, and Momentum. Get all BBIG ratings here.
Bottom Line
As the meme craze has recently returned after a pause for a few months, BBIG is making headlines due to its skyrocketing rally. However, this unusual rally in the stock has little to do with the company’s fundamentals. BBIG possesses poor financials and profitability.
Since the surge in BBIG is not connected with its fundamentals, we think investors should avoid it amid an uncertain macro environment.
How Does Vinco Ventures, Inc. (BBIG) Stack Up Against its Peers?
BBIG has an overall POWR Rating of F. One could also check out these other stocks within the Consumer Goods industry: Mannatech, Incorporated (MTEX) and Ennis, Inc. (EBF) with an A (Strong Buy) rating and Vivint Smart Home (VVNT) with a B (Buy) rating.
BBIG shares rose $0.02 (+2.09%) in premarket trading Wednesday. Year-to-date, BBIG has declined -58.82%, versus a -17.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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