BusinessFeatured

Toughbuilt Industries: An Undervalued Innovator

After a series of articles covering pharma, biotech, and energy stocks, our next small cap pick is a very interesting play within the industrial products space – Toughbuilt Industries (NASDAQ:TBLT). While industrials as a sector have been hit due to their heavy dependence on China amid the fears of the Wuhan coronavirus, it appears to be an excellent opportunity to grab undervalued small caps. we believe Toughbuilt Industries perfectly fits the bill. While the stock is currently trading at 20 cents a share, we don’t think the valuation adequately reflects some of the excellent products in its pipeline and its rapidly growing distribution across a large addressable market.

What Does Toughbuilt Do?

ToughBuilt Industries is an innovator within the home improvement and construction products space. The company designs, develops, manufactures, and distributes a number of innovative products for the building industry in the United States and across the globe. With a core focus on safety, Toughbuilt’s key offerings include tool pouches, tool rigs, tool belts and accessories, tools bags, totes, office organizers, laptop bags, cell phone and tablet covers, and kneepads. Its product offering also includes sawhorses, miter saws, table saws, and roller stands, and gloves. The California-based company uses Toughbuilt as its brand name and its products are sold through retail outlets, big box stores, professional outlets, e-commerce platforms, as well as direct marketing to construction companies. Founded in 2012, Toughbuilt competes with the likes of DeWalt, Milwaukee Tool, Valeo, and Hilti.

Innovation Leads The Way

Toughbuilt is not just a toolmaker or a drill-maker. The company seeks to offer every potential product that falls within the umbrella of tools and safety in the construction process. Whether it is hammers and wrenches, or measurement tools, stands, screwdrivers, pouches, or even mobile phones, Toughbuilt covers it all. The company is launching dozens of new SKUs each quarter and has a very interesting pipeline which includes offerings like thermal imaging, meter testing, and dual laser measurement. These and many other reasons are why we believe Toughbuilt can prosper in an industry which has larger players like DeWalt that are purely focused on tools and drills alone. All its innovative offerings are jobsite-tested, and it has the capability to become a market leader in every new category it ventures into.

The company focuses on high-quality offerings and a minimal time-to-market. Interestingly, Toughbuilt has an average inventory turnover of only 27.88 days which is better than 94% of the companies within the Industrials space as per Gurufocus data. We believe this is a testament to its focus on high quality products. One of management’s top priority to accelerate growth will be the expansion of its capacity and the addition of new SKUs.

A Large Addressable Market With Unmet Needs

While Toughbuilt provides a wide variety of tools and safety solutions to the construction industry, its pricing is well within the affordable range and is competitively priced to compete with the likes of DeWalt. The company caters to a $350 billion home improvement market which grew at more than 5% in 2019. Its target customer base is as high as 12.5 million Americans including construction employees, production employees, and supervisors. The management aims to target professionals like plumbers, electricians, painters, architects, carpenters, building inspectors, surveyors, roofers, and different kinds of contractors to push for direct sale of its products. Given the ongoing demand for better safety of these professionals as well as increased efficiency in executing their tasks, Toughbuilt’s products should be in high demand among this community.

Global Expansion Strategy

While Toughbuilt is a small company in a space dominated by giants like DeWalt, it differentiates itself from the pack through constant innovation. The company has developed more than 70 new SKUs in the past quarter and is distributing them through a wide network of online and offline retailers. In the United States, its key partners include giants like Lowe’s (NYSE:LOW), Home Depot (NYSE:HD), Walmart (NYSE:WMT), and Menards. Its key partners in the rest of the world include Leroy Merlin (Europe), Sodimac (Latin America), Kincrome, and Bunnings Warehouse (UK, Australia, and New Zealand). The management is also in the process of penetrating second-tier stores such as True Value, Ace, and HD Supply. Its online retail strategy is currently focused on Amazon and so far the company has gained good traction. With access to 3,400 retail outlets in the United States and distribution in 22 countries, Toughbuilt shas plenty of opportunity for growth and expansion.

Toughbuilt Is Undervalued And This Is An Excellent Opportunity

As seen in the chart above, Toughbuilt stock has gone through some tough times.  Factors that may have played a role in this decline include slower industrial production and construction spending, the U.S. China trade battle and most recently concerns about how the coronavirus will affect growth. It must be noted that Toughbuilt’s business grew as much as 22.1% across the first 9 months of 2019 and we believe is poised for stronger growth in 2020 with nearly a 100 new SKUs expected to be launched in this year. We think the market is not factoring this into the price as we see the stock trading at a measly 0.15x Price to Sales ratio. Even if we factor Toughbuilt’s Net Debt, the EV/Sales ratio is still 1.15 which is way below a realistic number, given the level of innovation of this company. We think, given these factors, there is ample room for multiple expansion and value creation for shareholders. A growing top-line should further add to shareholder value.

Key Takeaways

Given the coronavirus backdrop and markets under pressure all over the world, it is natural for investors to be cautious.  However, for many this is also the time to be opportunistic and grab undervalued high-growth small caps like Toughbuilt. The company is on track for significant growth owing to its varied line of offerings and is trading at 20 cents a share or 0.15x Price to Sales which is extremely low. With its growing SKU offering and expanding distribution network, we believe Toughbuilt has a bright future ahead of it.

Disclaimer

This website is a wholly owned subsidiary of Salesparq, LLC, herein referred to as Salesparq, LLC. Our publications are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. We may receive compensation for this article on a PPC basis as an affiliate. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.PLEASE NOTE WELL: Salesparq, LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.Release of Liability: Through use of this website viewing or using you agree to hold Salesparq, LLC, its operators owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Salesparq, LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and Salesparq, LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provided herein. Instead Salesparq, LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D. Salesparq, LLC is compliant with the Can Spam Act of 2003. Salesparq, LLC does not offer such advice or analysis, and Salesparq, LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries and extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled. The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results.In preparing this publication, Salesparq, LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. Salesparq, LLC has not been compensated for this article. The advertisements in this website are believed to be reliable, however, Salesparq, LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. Salesparq, LLC is not responsible for any claims made by the companies advertised herein, nor is Salesparq, LLC responsible for any other promotional firm, its program or its structure. Salesparq, LLC is not affiliated with any exchange, electronic quotation system, the Securities Exchange Commission or FINRA.
Show More

Related Articles

Back to top button