This Stock Could Enjoy an 80% Increase in Gross Profit Margin
LiveDeal to Enjoy Greater Operating Leverage in 2015
New Initiative Could Increase Key Products' Gross Margin by 80%
LiveDeal, Inc. (NASDAQ – LIVE – $2.95 – Spec Buy) recently announced that its Modern Everyday Inc. subsidiary will soon begin to manufacture some of its high-demand products. This forward-thinking strategy will likely result in substantially higher gross margins on these products as compared to the typical profit margins associated with stand-alone product distribution. In fact, management noted that gross margin could increase by as much as 80% on these product sales.
This new approach transforms Modern Everyday Inc., and thus LiveDeal, into a vertically integrated entity that could eke out greater revenue, as well as profit, according to the Company. Plus, the manufacture of its own products could lead to better pricing control from production to sale and ensure greater product availability. Investors may also benefit from this initiative since valuations for companies that produce products tend to be higher than pure distribution entities.
Since the acquisition of the subsidiary in August 2014, the company has been a very good investment for LiveDeal. The Modern Everyday subsidiary traces its roots to 2008 and began focusing its efforts on the household and housewares markets in late 2012, with increasing success in its California-based retail location and its online marketplace.
LiveDeal recently released its fiscal first quarter 2015 financial results and it illustrated a nearly 1200% quarter-over-quarter increase in sales to roughly $8 million. It will be interesting to see how the success of this new approach affects the potential production of other goods ModernEveryday.com currently sells, thus enhancing LiveDeal's overall financial performance later in the year.
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Senior Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research in 2009 and has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.
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