A 153% increase in revenues in the recent quarter is one of the reasons why Verus International Inc (OTCMKTS: VRUS) is a bargain at current levels. While the stock has taken a significant hit in the market, growth in the core business affirms growth metrics. The company projecting a record-breaking year on revenue growth also affirm the company’s long-term prospects.
VRUS Price Analysis
Verus International has also signed a number of capital funding deals. With the new financing, the company remains well-positioned to pursue strategic initiatives to accelerate growth in the core business.
While price action paints a different picture to the improving fundamentals, a change in the direction of trade could be in the offing. Amidst the underperformance of the second half of the year, Verus International remains bullish given the underlying long-term uptrend. The stock is up by more than 500% for the year.
The $0.015 mark has since emerged as a critical support level above which the stock remains supported for a bounce back after a steep pullback from 52-week highs. Above the critical support level, Verus International should be able to make a run for this year highs above the $0.03 mark. However, a breach of the $0.015 support would leave the stock susceptible to further drops given the current downtrend.
What Does Verus International Do?
Verus International is a company engaged in the distribution of consumer products worldwide. The company is engaged in the distribution of frozen foods, meat poultry as well as seafood and vegetables in the Middle East, North Africa as well as the United Arab Emirates.
Solid Q2 Earnings
Verus International is a potential bounce-back play, as the current share price does not accurately reflect the solid underlying fundamentals. The stock has tumbled in recent weeks due to the overall stock market turning bearish. In contrast, the company’s core business continues to grow at an impressive rate, as depicted by second-quarter earnings results.
In the second quarter, the company generated $2.9 million in revenue, representing 153% increase from the second quarter of 2018. Gross margin rose to historical highs of 15.4%. Operating expenses as a percentage of revenue improved to 23.7% compared to 38.3% generated a year earlier.
Verus International generated $2.2 million in net income in the second quarter attributed to a decrease in operating expenses. According to the chief executive officer Anshu Bhatnagar, Q2 earnings report affirms an ongoing growth cycle.
“The Q2/19 results provide more evidence that our growth cycle had already begun, even before our recent growth initiatives. We acquired Big League Foods in the last week of Q2/19, and our latest capital infusions were signed after the quarter-end. Q2/19 should be viewed as a strong launchpad for even better growth in the second half of 2019,” explained Mr. Bhatnagar.
VRUS 2019 Outlook
According to the chief executive, Verus International growth rate should accelerate in the second half of the year. Growth will mostly come from the MLB-branded businesses as well as on international lines. The Chief Executive officer is projecting triple-digit growth for the remainder of the year.
The signing of a $500,000 credit line with the Columbia Bank should allow Verus International to pursue strategic initiatives for ramping up growth. The company has already hit the ground running in putting the line of credit to use in a new business line. Based on average inventory turns, the company expects the LOC to generate between $7 and $10 million in annual revenues.
“We have considerable unfunded business waiting for financing, so this funding will have one purpose – to grow our revenue. Because we are using this for working capital, the effect on sales will be immediate, with the added bonus that the favorable terms will also help our margins,” added Mr. Bhatnagar.
In addition, Verus International has signed a $605,000 fixed rate in a convertible note from Eagle Equities. The note, which is due in 2020, should strengthen the company’s financial base.
Verus International has had a phenomenal run since the start of the year. While the stock has pulled lower in recent weeks, it is still up by more than 100% for the year. The pullback, in our view provides an opportunity to buy the stock at a discount.
Solid underlying fundamentals depicted by robust revenue growth and a solid financial position are some of the catalysts that support a bounce back after the recent correction lower. We expect VRUS to hit new highs before the end of 2019.
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Disclosure: We have no position in VRUS and have not been compensated for this article.