Digital Brands Group shares rallied into the close, finishing the day roughly 6% higher with trading volume more than 7X the average exchanging hands. Investors betting on bullish earnings weren’t disappointed. After hours on Monday, $DBGI released financial results for its Q1 ending March 31st that was, in a word- stellar. And the better news, for those taking the long side, is that guidance sets the stage for Q1’s performance to be the precursor of better things to come. Hence, although DBGI shares presented value before, at about $0.25 post report, prices may be too good to ignore.
That’s not an overly bullish sentiment, especially with DBGI doing its part to contribute to the value proposition by posting Q1 2022 numbers that impressed. In fact, they published a trifecta of positive performance that could help close a valuation disconnect sooner than later. And with the company firing on all cylinders, it’s likely.
In its report, DBGI showed net revenue surging to $3.4 million, increasing 740% year over year. Supporting those revenues was an increase in gross profit margins by 94% year over year to 42.9% from a negative 50.8% a year ago, resulting in an increase of $1.7 million in gross profit dollars. That’s not all. The net loss per diluted share dropped appreciably to $0.59 versus a net loss of $4.55 per diluted share a year ago, improving 671% year over year.
Moreover, while the net loss attributable to common stockholders increased, that jump included non-cash expenses associated with a change in the fair value of contingent liabilities and amortization of loan discount and fees of $3.0 million. Thus, for those wanting growth, they got it. And better still, put EBIDTA in the crosshairs this year.
Remember, too, that these positive results come during a continued period of market challenges. Although the supply chain issues from COVID started to slowly improve, markets are getting hit from the other side by inflation numbers not seen since the 1980s. However, the meaningful improvement in DBGI’s operating results shows that its digitally-focused business model can and does work to maximize revenues.
And with revenues increasing year-over-year, that’s good to know. Also good to know, from an investor’s perspective, is that DBGI expects growth to remain robust, noting that in addition to year-over-year revenue growth, its current wholesale orders for this summer and fall indicate that a tailwind is in place to deliver more of the same. DBGI also said that revenue growth creates leverage on its fixed costs, positioning the company to maximize that growth by fully leveraging its fixed costs.
Thus, with a home-run Q1 in the books and more of the same expected through 2022, DBGI stock is attractive. But, as is often the case, investors finding undervalued stocks in hypergrowth can quickly close the window of opportunity. Hence, investment in DBGI may be more than timely; it could stay in fashion.
Investors in DBGI are encouraged to listen to the earnings call at 5:30pm EST today. Details are below. Follow Level3Trading.com for updates in the after-hours session.
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