Is Dogness a Good Pet to Own?
Based at Dongguan, China, Dogness (International) Corporation (DOGZ) designs, manufactures and sells fashionable products for dogs and cats. The company guarantees industry-leading quality through its fully integrated vertical supply chain and world-class research and development capabilities.
By strategically allocating resources to manufacturing and promoting relatively high smart pet products within the integrated smart pet ecosystem, DOGZ’s stock has seen strong price performance in recent months. . The stock has gained 36.7% in the past month and 106.6% since the start of the year.
However, the company’s negative profit margins and above-industry valuation could make investors nervous and cause its share price to drop in the near term.
Here is what could influence the performance of DOGZ in the coming months:
DOGZ recently completed an offer for 2,178,120 common shares at a price of $ 1.82 per share, which generated gross proceeds of approximately $ 3.96 million. The company intends to use the net proceeds of the offering for working capital and expand its business, enriching the lives of pets through an expanded range of traditional and innovative technology products. However, according to pecking order theory, the use of equity financing as a source of funding shows the inability of the business to generate sufficient cash flow for its operational needs. In addition, this can lead to dilution of equity for existing shareholders and should be seen as an alarming signal.
DOGZ’s 7.6% EBIT margin over the last 12 months is 20% lower than the industry average of 9.5%. In addition, its net profit margin of 6.2% is 5.2% lower than the industry average of 6.6%. In addition, its 12-month rolling cash flow of $ 3.75 million is 98.1% lower than the industry average of $ 195 million.
In rolling 12-month price / cash flow terms, the stock is currently trading at 38.14x, 208.2% above the industry average of 12.37x. In addition, its 6.15x rolling 12-month EV / Sales multiple is 293% higher than the industry average 1.56x. In addition, DOGZ’s 5.09x over 12 months Price / Sales is 280.2% higher than the industry average 1.34x.
POWR ratings reflect grim prospects
DOGZ has an overall D rating, which is equivalent to selling in our own POWR odds system. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight distinct categories. DOGZ has a D rating for value and quality. The valuation of the company higher than that of the industry justifies the Value rating. In addition, the company’s low profitability is in line with the Quality grade.
Of the 70 C-rated stocks Consumer goods industry, DOGZ is ranked # 61.
Beyond what I stated above, you can check out the DOGZ ratings for Growth, Momentum and Feeling here.
Robust sales growth and a sustainable product offering have contributed to DOGZ’s strong financial performance and pricing momentum in recent times. However, the company’s high valuation and negative profit margins could add uncertainty to the stock’s short-term outlook. So, we think it’s best to avoid DOGZ now.
How does Dogness (International) Corporation (DOGZ) compare to its peers?
While DOGZ has an overall D rating, one might want to consider its industry peers, Mannatech Incorporated (MTEX), Company BIC SA (BICEY) and Ennis Inc. (EBF), with an overall A rating (strong buy).
DOGZ shares fell $ 0.13 (-2.98%) in pre-market trading on Tuesday. Year-to-date, DOGZ has gained 104.74%, compared to a 26.70% increase in the benchmark S&P 500 over the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college, she majored in finance and is currently pursuing the CFA program and is a Level II candidate. Following…