We here at Equities.com are always on the lookout for that next big idea, the sort of searingly original concept that’s bound to create massive revenues and rocket stock values into the stratosphere. Hot new social media companies, ride sharing apps, high-end electric cars, whatever it may be, we’re searching for that cutting edge where genius meets money.
That’s why I was blown away when I heard that The Grilled Cheese Truck (GRLD) is a publicly traded company. How did we miss this opportunity? One of their trucks occasionally parked outside our office at lunch. How did none of us, after spending $8 for a grilled cheese sandwich, not immediately recognize the tremendous business potential?
Well, someone did, as the company now has a valuation of more than $80 million. What’s that? $80 million for a product that basically consists of bread, cheese, and heat seems a bit high? Well, we beg to differ! In fact, it may be too low; it is down from its high of $108 million, where the stock started trading at the end of January. Let’s get cheese sandwiches back to nine figures!
Now, some of you innovation-hating naysayers are probably already busy dreaming up ridiculous criticisms of that valuation. You’re probably fixating on how the company lost $5.61 million in 2013, or how it only actually has four trucks in operation. I can hear these simpletons now: “I would never buy a stock trading at 40 times sales.” “How can food trucks possibly expect to compete with the myriad of fast-casual options popping up?” “EIGHT DOLLARS FOR A GRILLED CHEESE SANDWICH?!?!”
Fools, all of you. This is obviously the sort of revolutionary approach to the markets that even Steve Jobs or Elon Musk couldn’t truly fathom. Sure, it may not seem rational at the moment, but maybe that’s just because you’re not a TRUE visionary. So, here’s a look at just a few of the myriad possibilities that might explain why this company is valued at $80 million.
Really, Really Awesome Trucks
So, some people might look at a company with four trucks and an $80 million valuation and think “that’s basically $20 million a truck.” Sure, SOUNDS insane, but you’re assuming that these are normal food trucks – not trucks with “Grilled Cheese” painted on the side. Further still, could these trucks be powered by engines that use a brand new type of fusion technology? Do they have a parachute that comes out of the back with the Union Jack on it? MAYBE IT’S A TRANSFORMER. You don’t know.
They Could Have Patented Grilled Cheese
Sure, some may look at the concept of serving “gourmet” grilled cheese and think “oh wow, how stupendously easy it would be to steal that idea.” Sure, it may SEEM like anyone could use high-quality bread and cheese to make sandwiches, but what if the Grilled Cheese Truck has cleverly protected their intellectual property by patenting the act of melting cheese between two pieces of bread?
Not only are they going to be able to continue selling their own sandwiches, but diners across the country would have to start paying them royalties. When their application to patent tomato soup comes through, expect the stock to spike even further.
Could These Trucks Find Jesus?
Remember when that lady found an image of the Virgin Mary on a grilled cheese sandwich? That single sandwich sold for $28,000. See where I’m going with this? Sure, MOST of the sandwiches you make won’t have images of religious figures on them, but this business plan cleverly allows them to maximize their chance at that miracle sandwich. Sure, in the short term they may look like a stupid food truck idea that’s hemorrhaging money, but that’s just until they start pumping out sandwiches with John the Revelator on them.
Maybe They’re Long Gold
Gold is going to $10,000 an ounce. You know it. I know it. The death of fiat currencies is nigh. Maybe the food trucks are just the public face of a commodities trading strategy that will really pay off when we FINALLY go back to the gold standard. It will happen, mark my words! Stop looking at me that way!
Sales Growth Figures are Through the Roof. I Mean, the Roof of This Truck, Which is Pretty Low, but A Roof Nonetheless.
So, growing companies typically have valuations that are much larger than the sales or earnings would dictate for companies later in their lifecycle. Sure, some might look at a stock price 40 times annual sales and pass. But hey, it’s a growing young company, the stock tends to rise faster because of the tremendous promise shown by the company’s growth.
Chipotle (CMG) , for instance, is currently trading at a price that’s about five times its annual sales. That’s high, but Chipotle has been growing fast and the stock is hot, up almost 550% over the last five years. You pay a premium for a growing company, standard stock market stuff.
Looking at The Grilled Cheese Truck, 2013’s figure of $2.03 million in revenue was a 55% jump over 2012. At that rate, it’s a mere five years of owning a stock without any growth in value before you’re down to a P/S ratio of 6! Come on, how do you NOT buy into that?!
And sure, you might point out that a 55% jump in revenue resulted in a tripling of operating expenses and losses increasing from $1.19 million to $5.61 million, but you’re just not thinking outside the box! Amazon (AMZN) never turns a profit, and this is just like that. Exactly the same…unless it’s more like Pets.com.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer