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Shares of Amplify Snack Brands (BETR) are popping higher by about 6% on the session, even as the broader market continues to nose-dive lower. There doesn't appear to be any specific fundamental catalyst for today's move, although yesterday's action in the stock had signs of a bottoming out process. Specifically, the stock trading sharply lower intra-day, but, managed to rally and close near the top of its trading range. Investors could be taking that as a cue that a floor has been found, at least in the near-term.

Rewinding a bit, BETR went public on August 5, pricing its 15.0 million share IPO at $18, above the $14-$16 expected range. However, the stock opened for trading at $17, or 5.5% below its IPO price, and with the exception of a couple strong initial days, the stock has been weak ever since its debut. The softness in the stock is likely the combination of a lofty valuation at the time of its IPO (P/S of ~7.4x), and a general malaise surrounding recent IPOs.

Not much has happened, in terms of news, for BETR since its IPO. The quiet period hasn't expired yet, so, firms involved with its IPO haven't published their initiations yet. That occurs on August 31. The company hasn't reported its Q2 earnings report yet either, nor is there a date set yet, or estimates available.

Quick Review of BETR

Amplify Snack Brands is a high growth, snack food company focused on consumers' growing preference for Better-For-You (BFY) snacks. Its anchor brand, SkinnyPop, is a rapidly growing, highly profitable and market leading BFY ready-to-eat (:RTE) popcorn brand. It's made with major allergen-free and non-GMO ingredients. It has amassed a loyal and growing customer base across a wide range of food distribution channels.
While SkinnyPop is BETR's core brand, it also recently acquired another snack food brand: In April 2015, BETR acquired Paqui, an emerging BFY tortilla chip brand that has many of the same key taste and BFY attributes as SkinnyPop. Paqui allows BETR to leverage its infrastructure to help it grow into an adjacent snacking sub-segment with a second innovative BFY brand.

BETR believes that its focus on building a portfolio of exclusively BFY snack brands differentiates the company. It allows the company to leverage its platform to realize synergies across its family of BFY brands, as well as allow retail customers to consolidate their vendor relationships in this large and growing category.

BETR estimates the US salty snack segment to be approximately $18 billion and that it will grow approximately 3-4% per year through 2019. To date, BETR's focus has been on developing brands in the rapidly growing BFY sub-segment of salty snacks. Within the salty snack segment, BFY-focused brands are taking share from conventional brands, and the company estimates that BFY brands experienced 10+% growth in 2014.


Taking a quick look at the financials, the first thing that stands out is that the company is profitable and it looks surprisingly attractive, at least the income statement does. The company has been posting impressive top line growth. In 2014, revenue rose 138% to $132.4 mln on a pro forma basis. In 1Q15, it increased 72% YoY to $44.3 mln.

Its operating margins in the mid-20% range are quite impressive. Same came be said about its adjusted EBITDA (proxy for operating cash flow) margins in the mid-40% range. That shows BETR generates a good amount of cash.

While the revenue growth, profitability and strong margins are all very good, a strike against BETR is that it has a lot of LT debt. On a pro forma basis, as of March 31, BETR had long term debt of $210 mln vs shareholders equity of $104 mln for a LT Debt-to-Cap of 67%, which is very high.

12:54 pm Looking Ahead: August 24, 2015

With global economic slowdown concerns driving things at the moment, economic data from the world's largest economies will continue to be watched closely. On Friday those concerns were triggered by a weaker than expected manufacturing PMI reading out of China. Come Monday Germany will be in the spotlight with the release of its preliminary manufacturing PMI report for August.

Germany Manufacturing PMI (3:30 a.m. ET)

  • Why it's important
    • Germany is the engine that drives the eurozone economy. Business activity for its manufacturing sector will impact sentiment with respect to the economic outlook for the eurozone and the global economy.
    • As the world's fourth largest economy, the manufacturing survey out of Germany has the ability to change, or to solidify, the slowdown narrative that has gripped global equity markets
    • Germany's DAX Index has declined 10.9% over the last month. Local investors will most likely view this report as an opportunity to turn the tide of selling if it is better than expected or continue to sell if it shows a deceleration from July.

  • A closer look
    • After slipping below 50.0 in November (the dividing line between expansion and contraction), Germany's Manufacturing PMI has been in an expansion mode for the last...