I am neutral on Naked Brand Group (NASDAQ: NAKD) as its innovative nature, strong e-commerce positioning, and high growth potential are offset by a lack of profitability, growth performance to date, and highly competitive and unpredictable industry.
Naked Brand Group specializes in swimwear and intimate digital apparel, focusing exclusively on online channels.
The company has a strong brand and a robust balance sheet that has ideally positioned it at the forefront of the industry.
Strengths
The Naked Brand Group has many outlets in approximately every state across America, supported by its impressive distribution network. This ensures that products are easily available on time to its large customer base. It has managed to acquire a large following because of its low-cost structure.
Since it produces its products at a low cost, it sells them at a low price. Moreover, several stages in its production pipeline are automated, which allows it to use resources efficiently while ensuring low costs.
NAKD earned $59.18 million in Fiscal Year 2020, and only $52.27 million in FY 2021.
Valuation Metrics
NAKD stock is difficult to value given that it is running up losses and it operates in a highly unpredictable environment as a high-growth business.
That said, on a trailing 12-month basis the company trades at a mere 6.3 times sales. As a result, if it can effectively expand margins will continue to grow sales, the stock could offer compelling value for investors or current prices.
Summary and Conclusions
Naked Brand Group is an innovative company with a very strong presence in the high-growth e-commerce domain. If it can effectively leverage this position while also sustaining its brand strength, product affordability, and style appeal to its target audience, it could experience massive growth in the coming years and scale effectively into profitability.
However, the company has thus far experienced choppy growth momentum and given that it has yet to generate sustainable profitability, is a high-risk bet in a very challenging and extremely competitive industry.
Download the TipRanks mobile app now
Read full Disclaimer & Disclosure
