I think one of the best ways to substantially increase your wealth is to buy and hold quality growth shares that are trading at a discount. Businesses with a distinct competitive advantage and that are owner-led are 2 big ticks of approval.
And whilst this year has been rocky for the share market, there are a few companies on the ASX that have blossomed, achieving record sales from pantry stocking and convenience buying. Businesses such as Bubs Australia Ltd (ASX: BUB) and Marley Spoon AG (ASX: MMM) have seen their revenue skyrocket during the coronavirus pandemic.
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How is Bubs different from its competitors?
Bubs has diversified itself from a specialty infant formula provider to Australia's largest producer of goat dairy and children's nutrition products. Its multiple brand portfolios cover a range of segments, from newborns to toddlers and even adults. Its ever-growing new product development and expansion will undoubtedly support its future success.
Bubs is unique compared to its rivals, because it is vertically integrated and controls its own supply chain and manufacturing. This allows the company to respond to a surge of sudden consumer demand, as seen in its third quarter, which saw significant buying across all key segments.
In addition, Bubs has been looking to enter new geographical markets, which can help drive future sales. While most companies in the baby formula industry solely focus on countries like Australia, China and the United States, Bubs has looked elsewhere to locations like Vietnam and the Middle East. These addressable markets with millions of consumers will no doubt have strong impact on the company's bottom line and should bode well for the Bubs share price.
How has Bubs performed during COVID-19?
Late last month, Bubs released its Q4 FY20 result, in which gross revenue increased 32% to $62 million. The company also reported a robust balance sheet with $26 million in cash reserves. Whilst there was a 5% drop in revenue from the prior corresponding period (pcp), this was foreseen due to the panic buying of COVID-19.
Nonetheless, Bubs' top 3 markets have all delivered strong growth year-on-year, and exports (excluding China due to its complex channel mix dynamics) have risen 71% from the pcp.
Bubs has said that consumer demand remains strong in all key markets, despite the growth momentum being temporarily impacted. The company is predicted to be breakeven in 2021, before generating profits of $2.1 million later that year. With low debt obligations, Bubs has prudently used its capital to finance its operations, thus reducing the risk around a loss-making company.
Is the Bubs share price a buy?
Since Bubs first listed in 2017, new product launches and distribution channels have expanded the company's revenue streams to record consistent quarterly growth.
Just recently, Bubs announced its new 'Vita Bubs' (vitamin and mineral supplement for children) and national distribution to over 400 Chemist Warehouses stores from October 2020.
The company has been making strides to increase market share and global presence. International supermodel Jennifer Hawkins has signed for the next 3 years to become Bub's global brand ambassador. Her social media reach and influence as a new mother herself will no doubt have a positive effect on the Bubs share price.
I believe that the Bubs share price is trading at an attractive level (at the time of writing) of 90 cents. This is a drop of 15% within the last month and a perfect time to pick up a bargain, in my view.
