OldSchoolValue.com - Fisher's 15 Point Checklist: AeroGrow (AERO)

Submitted by Frank Lara Jr on Mon, 05/12/2008 - 20:57

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Financial News

Fellow Masters, passing on a great article from OldSchoolValue.com on a company called AeroGrow International, Inc. (NASDAQ:AERO) that trades for $2.67 a share. Their AeroGarden that grows plants using just air and water is amazing, but can it get the backing from Wall Street?

Be sure to read Jae Jun's detailed analysis which in the end scores 11 of the 15 points where 3 of the points come out neutral.

Never heard of AeroGrow?

At first glance, I'll admit, I thought the AeroGarden had a fad feel to it, maybe the new Pet Rock of 2008. Just imagine those bad boys with some bubble eyes glued on and flashy packaging, it could happen? AERO shares have tanked over the last year, down 61% so right away I thought 'caution'.

Turns out the company that has sold 400,000 gardens, has products in 4,300 stores -- including retailers such as Target and Bed, Bath and Beyond -- and has increased the variety of AeroGardens and accessories. All done by a 100-employee company.

The expectations are to nearly double the retail outlets and continue to broaden the products -- which currently range from $99 to $299 -- to become more accessible to even more markets and more consumers.

Now the company is expanding its product line with gardens that are lower-cost and designed for different areas of the house -- including the AeroGarden 3 at $99, the Space Saver6 at $149 and the Pro 200 at $199.

From their website:

The AeroGarden^® is the world's first indoor smart garden - It's so easy to use that anyone, with or without gardening experience can grow lush, beautiful gardens right in your home!

The computerized AeroGarden^® tells you when to add water and nutrients. The built-in micro-processor automatically adjusts nutrient delivery and water flow and turns grow lights on and off to simulate the sun.

The books could be better for this young company, but for where they are at, its not bad:

Financials

(In millions of USD)

Income Statement	Quarterly (Dec '07)	Annual (2007)	Annual (2006)
Total Revenue	14.64	13.14	0.04
Gross Profit	5.70	4.74	-0.10
Operating Income	-1.45	-8.54	-5.77
Net Income	-1.66	-10.39	-7.54
Balance Sheet
Total Current Assets	17.55	12.07	9.29
Total Assets	19.07	13.04	9.84
Total Current Liabilities	11.12	5.06	1.93
Total Liabilities	11.29	5.06	1.93
Total Equity	7.79	7.98	7.92
Cash Flow
Net Income/Starting Line	-1.66	-10.39	-7.54
Cash from Operating Activities	-3.17	-9.53	-0.80
Cash from Investing Activities	-0.21	-0.75	-0.10
Cash from Financing Activities	0.91	6.92	8.81
Net Change in Cash	-2.46	-3.36	7.90