Sack Lunch Productions Inc. (OTC Pink: SAKL) is one of the only publicly traded pure-plays in the fragmented Millennial-focused event entertainment space. With events like The Lantern Fest, Slide the City, Color Me Rad, and The Dirty Dash, the company expects to generate $18 million in revenue this year and launch in both new U.S. cities and internationally. Shares have doubled over the past 12 months in response, but recent profit-taking has created an opportunity.

Growth Potential

Sack Lunch Productions estimates the U.S. event driven entertainment industry to be approximately $20 billion in size. With just $10.7 million in 2015 revenue, the company is barely scratching the surface of its potential within the market. Management plans to expand its presence within the industry through a combination of organic growth and acquisitions that leverage its publicly traded status in a highly fragmented industry.

Sack Lunch Productions, Inc. (OTC Pink: SAKL) $17 Million Growth from International Expansion & Strategic Acquisitions

Hundreds of thousands of people participated in the company’s nearly 100 corporate and franchise events in 2015, and SAKL is now on track to complete more than 200 events in 2016.

SAKL’s new $5 million senior credit facility facilitates organic growth with 136 corporate events, 35 Intl. events, and 40 domestic franchised planned this year.

Why Sack Lunch Productions, Inc. (OTC Pink: SAKL) is Set to Double Again

This rapid expansion already caught the attention of some individual investors earlier this year, sending shares of SAKL up as much as 200% in 2016.

Then a wave of profit taking hit the stock in June, creating a compelling opportunity for new investors to own shares at a great price.

Why Sack Lunch Productions, Inc. (OTC Pink: SAKL) is Set to Double Again
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Looking at the company’s stock chart, the pullback briefly touched lower trend line support at around $0.045 before rebounding back above the 200-day moving average at $0.071. The 200-day moving average forms a great support level, while the RSI appears neutral at 51.07 and the MACD experienced a bullish crossover. Investors might consider a smaller position in the stock at these levels and average in as the rebound gains traction.

At its recent price of only $0.08 per share, SAKL was trading for less than 1.0x its trailing twelve months sales, yet according to analysis by SECFilings.com, SAKL’s peers typically trade for 2.0x-2.4x sales.

If SAKL were to trade at even the low end of its peer averages, it could see a $21.4 million market cap, more than twice what it is today.

As we’ve just begun what is historically the company’s strongest quarter of the year, this low valuation creates an amazing opportunity for fast-acting investors.

Robust Fundamentals

Sack Lunch Productions has grown its revenue from just under $5 million in FY 2014 to over $10.6 million in FY 2015. This year, the company anticipates generating about $17 million in revenue by launching events in new U.S. cities and around the world. Sack Lunch reported last week that the first six months of FY 2016, ending June 30, produced total sales of $10.015 million.

Moving forward, the company has a unique opportunity to pursue roll-up acquisitions across the event entertainment industry. The bargain acquisition of Springbok last August doubled the company’s size and set the stage for its current growth projections. Additional acquisitions could similarly bolster the company’s size, improve profitability, and open up further distribution for its other events across the country and globe.

The company’s modest $12.1 million market capitalization according to OTC markets implies a price-sales multiple of just 1.3x, which is significantly lower than the industry’s 2.0-2.4x average, according to Morningstar data. If the company’s shares were to trade with a 2.0x ratio, it would translate to a $21.4 million market capitalization that’s nearly double its current valuation – and that would be on the low end of the industry average range.

Looking at the company’s stock chart, the pullback briefly touched lower trend line support at around $0.045 before rebounding back above the 200-day moving average at $0.071. The 200-day moving average forms a great support level, while the RSI appears neutral at 51.07 and the MACD experienced a bullish crossover. Investors might consider a smaller position in the stock at these levels and average in as the rebound gains traction.

Looking Ahead

Sack Lunch Productions stands at an interesting point in its recent history. With revenue on the rise, the company appears to be undervalued on a fundamental price-sales basis. The recent pullback has exacerbated that discount and created a potential opportunity for investors to average in at a low price. With technical indicators pointing toward oversold conditions, it may be a good time to consider adding shares.

Over the coming quarters, the company also plans to complete an audit and become more fully compliant with regulators. These moves could open the door to a potential up-listing and encourage more institutional investors to become involved with the stock. In turn, this could reduce the high level of volatility and potentially bring shares closer to their fair value.

Sack Lunch Productions Inc. (OTC Pink: SAKL)’s current event portfolio includes:

  • Slide the City – A 1,000-foot vinyl slide that’s placed in the center of a city to create a fun and exciting block party event for the entire family.
  • The Lantern Fest – An unforgettable nighttime party that’s lit up with thousands of lanterns lit by participants and released into the sky.
  • Color Me Rad – A 5K race where participants are coated with liquids, powders, and gels of blue, green, pink, purple, and yellow until they’re tie-dyed on every side.
  • The Dirty Dash – A mud run obstacle course where a military boot camp meets an inner five-year-old fantasy.
  • Trike Riot – A race on Razor tricycles that takes participants down city streets and through obstacles to the finish line.

For more information, visit the company’s website at www.sacklunchproductions.com.

Disclosure:

All information contained herein as well as on the EmergingGrowth.com website is obtained from sources believed to be reliable but not guaranteed to be accurate or all-inclusive.

Source:

RedChip.com – https://www.redchip.com/pages/sakl/

TheOTCInvestor.com – http://www.theotcinvestor.com/sack-lunch-sakl-represents-a-compelling-value-for-those-buying-the-dip/

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