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The Alkaline Water Company Inc. (WTER stock) produces, distributes, and markets flavored and non flavored bottled alkaline water in the United States. In addition, they sell hemp-derived CBD topical and ingestible products. They sell through brokers and distributors to retailers. The company was founded in 2012 and is based in Scottsdale, Arizona.
The Good News
Their bottled alkaline water product is presently available in over 75,000 stores in all 50 states. Valued at a mere 140MM this company continues to grow sales and could potentially 10X in the coming years. The total addressable market is massive for its alkaline water. Another positive is CBD has exploded in popularity recently due to its health benefits. For an increasingly health-conscious world, this company is well-positioned.
The Alkaline Water Company only operates in the United States currently but plans to expand into new markets abroad. They have shown the ability to successfully add new distributors to their network which is a critical key for growth. Also, they have recently brought Shaq on board to become a mainstream brand ambassador this is great coupled with their large distribution network.
Lastly, they make a great acquisition target for a larger brand like PepsiCo, Inc. (NASDAQ:PEP) or The Coca-Cola Company (NYSE:KO). Soda sales have been dying year over year for over a decade. The big soft drink companies are always shopping for new healthier brands. This company has a lot of potential and has built a strong foundation over the last 9 years.
The Bad News
Currently, revenue is not sufficient to cover operating costs. Their ability to continue is dependent on obtaining adequate capital to fund operating losses until they become profitable. Raising additional capital could dilute current shareholders. They do however have adequate capital for the next 12 months. The alkaline water market is an emerging market and there is no guarantee that this market will expand further. They have 3 major customers that together account for 41% of accounts receivable at March 31, 2021. This is not ideal as one pulling out would have a great impact on revenue.
Conclusion
Investing is all about risk and reward. The WTER Stock is still flying under the radar of most. Overall this company is trending in the right direction. Its capital problems could put the company in deep water if they don’t sustain and grow sales. On the flip side, their revenue growth has been impressive and could continue to be so.
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