In today's video I look at Tattooed Chef's (TTCF) recent acquisition of New Mexico Food Distributors and Karsten Tortilla Factory. Below I share some green flags and one red flag investors should note with this deal.
Green flags:
- Tattooed Chef reaps a few strategic benefits from this deal. It is increasing its manufacturing capacity and diversifying into the Hispanic/Southwest market. It is also expanding outside the frozen food market and into snacks and other ambient products.
- Tattooed Chef gave an update on its future outlook, which involves a significant improvement in revenue growth. Before the acquisition it was expecting 49% year over year for revenue. After the acquisition it expects 58% to 63% growth, and this guidance will be updated later this year when another production plant opens up.
Red flag:
- With the updated guidance for FY 2021, Tattooed Chef expects adjusted EBITDA in the range of $2 million to $4 million and is giving no guidance on net income, when previously it guided for adjusted EBITDA in the range of $8 million to $10 million and net income in the range of $2.5 million to $5 million. As investors we should note that the decrease in adjusted EBITDA and lack of guidance on net income might suggest a loss for the year.
Click the video below for my full thoughts.
*Stock Prices used were the Midday prices of May 3, 2021. The video was published on May 3, 2021.
