Portfolio Update: NutraCea
NutraCea (OTCBB: NTRZ), a health sciences firm with a proprietary technique to stabilize rice bran and preserve the integrity of its rich nutrients, announced in an April 2 press release the results of its operations for the fourth quarter and full year 2006 ended Dec. 31, 2006.
Revenues for the fourth quarter totaled $5.2 million, an increase of 15.4% from revenues of $4.5 million in the fourth quarter of 2005. The press release notes, “The improved revenues and financial performance on a quarterly comparative basis have primarily resulted from the continued strength of the direct-to-consumer marketing of its nutraceutical products through the quarter ended Dec. 31, 2006. The Company continued to experience growth from its expanded product lines and increased demand of its value-added ingredients for the functional food industry and animal markets.” Net income in the quarter totaled $0.8 million, or $0.01 per share, based on weighted average shares outstanding of 76,696,000, compared with a net loss of $0.2 million, or $0.00 per share, in 2005 based on 38,815,000 weighted average shares outstanding.
For the full year 2006, revenues were $18.1 million, compared with $5.6 million for the twelve months ended Dec. 31, 2005, an increase of more than 225%. The press release notes, “The significant improvement in revenues and financial performance for the twelve months ended Dec. 31, 2006 is the result of the culmination of the merger with RiceX, direct marketing of its expanding line of products and sales of its core products into the functional food industry and animal markets and continued growth in sales of nutraceutical products through its licensing program.” For the year, NutraCea had net income of $1.6 million, or $0.02 per share, based on weighted average shares outstanding of 76,696,000, compared with a net loss of $3.9 million, or $0.10 per share, in 2005 based on 38,615,000 weighted average shares outstanding.
President and CEO Brad Edson commented, 'We are pleased to report our fourth consecutive record quarter and a record year, notably our first full year of profitability. This significant turnaround within just the last 15 months is a major achievement for the company.”
Mr. Edson added, “During the fourth quarter we accomplished many significant milestones, including the expansion of our production capacity in our Dillon, Mont., facility, the signing of several new distribution agreements for our products, and the achievement of recognizing the second consecutive quarter of licensing revenue from our patented formulations. We believe there will be additional plant expansions, strategic agreements and licensing opportunities during 2007 and beyond. In the ensuing quarters, based on initiatives already underway, we continue to anticipate sustainable positive financial results.”
Mr. Edson concluded, 'We are diligently focusing on opportunities to extend our production capability within the United States, and to further reach into other parts of the world to duplicate our U.S. success elsewhere. Our bolstered balance sheet, now carrying more than $60 million in cash and no debt, will assist us in such expansion and positions us, perhaps for the first time in the company's history, to be able to take advantage of more significant world wide opportunities that up until now have been unobtainable. We look forward to sharing these achievements with shareholders as they may arise.”
Since adding NutraCea to the Rising Star Stocks portfolio on June 29, 2006, shares have increased approximately 292%. The sole analyst following NutraCea, Steve Denault of Northland Securites, calls for earnings of $0.10 on revenues of $43.7 million in 2007 and earnings of $0.16 on revenues of $73.8 million in 2008. We strongly believe NutraCea’s run is still ahead of it and continue to be excited by this company’s progress and its potential. We are upgrading our Hold rating to a Buy and raising our price target of $3.00 to $4.00, which represents a pricing multiple of 25X forward year earnings. We feel this multiple to be fairly conservative for a firm estimated to grow its EPS by 60% from 2007 to 2008 and its revenues 68.9% over the same time frame.
Note: This portfolio update is from Rising Star Stocks, an independent investment advisory focusing on uncovering potential investments that are poised to revolutionize their industries. Rising Star Stocks is published monthly with an intra-month update and periodic special reports. For more information visit http://www.risingstarstocks.com
About the Author
Ian Wyatt is a co-founder and President of Business Financial Publishing and the Chief Investment Strategist and Publisher of SmallCapInvestor.com.
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