GrowGeneration Corp (OTCMKTS: GRWG) Continues To Impress

We are always looking for companies with outstanding net income growth or revenue growth. So, we are used to finding companies growing at a crazy pace. Honestly, it is difficult that a company brings financial figures that shock us. Having said that, the 130% revenue growth of GrowGeneration Corp (OTCMKTS: GRWG) did impress us last week. Matter of fact, after my colleague Richard Sandle wrote up the company, I wanted to do my own deep dive analysis to see what I thought. But first of all, take a look at the chart:SourceGrowGeneration Corp.The company was founded in 2014, the same year it acquired 4 existing hydroponic supply stores. Currently, GrowGeneration runs twelve retail hydroponic/gardening stores, with ten located in the state of Colorado, one in the state of California and one in the state of Nevada. It provides supplies to the hydroponic and gardening industry, equipment, lighting, plant nutrients, and other additional products used by professional growers.According to the last 10-k, the demand for growing equipment is quite high right now “due to legalization of plant-based medicines, primarily Cannabis, which is mainly due to equipment purchases for build-out and repeat purchases of consumable nutrients needed during the growing period". The demand is projected to continue to grow in the country. This seems to be the main driver of the outstanding revenue growth that the company reported in the last quarter. We could read in a press release that in 2020, the market value is expected to reach $23 billion with a compound annual growth rate of 32%.Fiscal year ended December 31, 2016On April 3, 2017, the company reported outstanding financial results for the last fiscal year. The full-year revenues were up 130% to $8.0 million. Also, its fourth quarter revenues were up 130% to $2.4 million. Darren Lampert, Co-Founder and CEO, reacted to these numbers and commented in the press release in the following words:"This was a record year for GrowGeneration, clearly demonstrating the scalability of our business plan and the demand for our products. We are achieving scale, as part of our expansion plan, and this was the fourth consecutive quarter of sequential revenue growth. We continue to see our growth 'lock step' with the growth of the cannabis market, as the cultivator's demand for equipment and supplies increases with the demand for legalized cannabis products." SourceAs we highlighted before, the CEO remarked that this financial position is a due to the increasing demand in the country:"Due to increasing demand, we are seeking to open larger stores, generating higher revenue and profitability. GrowGeneration is now at an annualized revenue run rate of over $10 million and we believe that we are well-positioned to continue to execute our expansion strategy to offer a one-stop and personalized shopping solutions for both the commercial and home growers. The store additions we have planned for 2017, along with continued same-store sales growth, are expected to increase our annualized revenue by nearly 100% to approximately $15 million." SourceBalance Sheet, shares outstanding and valuationAs of December 31, 2016, the total cash in hand reported was $606,644 and the total current assets $4.4 million. We wanted to find out more about the balance sheet, thus we went to check the full picture in the annual report, wherein we found that the most important assets and liabilities were the following:

• Cash and cash equivalents: $606,644
• Inventory: $2,574,438
• Total Assets: $4,442,953
• Accounts Payable: $535,913
• Short term borrowings: $107,880
• Long-Term Debt: $41,726
• Liabilities: $884,644

We appreciate the fact that the company shows very little debt and it is financing the growth with the accounts payables line and share issues. In addition, the most important asset is not an intangible asset or goodwill, but inventories ready to be sold to clients.We found a detailed explanation of the type of securities that the company issued in 2016.

• Issuance of common stock at $.60 per share: 300,000 shares
• Issuance of common stock at $.70 per share: 2,465,001 shares
• Warrants issued at $.07 per share
• Stock compensation at $.70 per share: 202,833 shares
• Total amount of shares as of December 31, 2016: 11,742,834 shares

Net income - What do we expect here?The company showed income of $7,980,471, but the final net income was negative, minus $431,244. The most relevant expenses and costs were the following:

• Cost of sales: $5.776,194
• Payroll, payroll tax and benefits: $993,024
• Rent expense: $306,115
• Travel expense: $114,512

If the company were able to maybe find cheaper locations and pay less to employees, it may become profitable, and the share price will react positively. This is the only aspect that, we believe, the CEO needs to take into consideration.What do we expect here and conclusionWe believe that the company has an outstanding future if the business keeps showing this type of revenue growth. The management needs to keep looking at the revenue line, but also needs to check the amount of costs and expenses in order to make this company sexy for financial analysts and investors. In any case, this is a stock may explode one day. GRWG remains well-positioned and is one of the more solid cannabis plays for investors today.We will be updating our subscribers as soon as we know more. For the latest updates on GRWG, sign up below!Disclosure: We have no position in GRWG and have not been compensated for this article.