Crystal Rock (CRVP) founded in 1914 is a home and office distributor for water, coffee, beverage products and office supplies. They bottle and distribute natural spring water under the Vermont Pure® brand, Crystal Rock® label and their own Cool Beans® coffee. Most sales derived from route distribution throughout the Northeast United States.
Customer value is created with
their unique services and products. Premium
Crystal Rock is ultra pure water produced with reverse osmosis and added
minerals. Crystal Rock Spring Water branded Vermont Pure comes from three
different springs in the South Western part of Vermont. Filtered only for
sediment, the spring water is highly regulated. Another Crystal Rock brand is Cool
Beans Coffee roasted in Hartford, CT. Furthermore, CRVP services their beverage
equipment and offers over 40,000 office product items including paper,
breakroom, janitorial, technology, furniture, custom print services, signs and
stamps.
The largest and most profitable revenue product is water sales.
Below is a table comparing 2015 to 2016 revenue by product line.
Current Valuation:
Insider trading for 2012 to 2017
Discounted cash flow using a modest projected FCF is greater than current price.
Additionally, management is moving the right levers for a higher intrinsic valuation. By improving the productivity, profitability and capital structure it will lead to a higher intrinsic value.
Strategic formula/Dupont Formula/ROE = Profitability x Productivity x Capital Structure
As shown below PROFITABLITY (improving gross margins, FCF margins, reducing expenses).
Productivity is driven by improving asset turnovers such as DSO, cash conversion,inventory turns.
Debt, and shares outstanding drive the capital structure improvements. These 3 areas of improvement (Profitability x Productivity x Capital Structure) will lead to a higher stock price.
Financial line items below from 2011 to the most recent reported highlights improving valuations with decline in enterprise value.
Long CRVP
The largest and most profitable revenue product is water sales.
Below is a table comparing 2015 to 2016 revenue by product line.
Commentary: Water
sales volume increased.The warm 2016 summer likely a contributing reason
for the volume increase.
The decrease in coffee sales was lower volume
due to commoditization pricing by competitors and availability in grocery/box
stores. Cool Beans® made up 19% of the category in 2016 compared to 15% in
2015. Lastly, management believes a large part of the decline is due to their website software
changes. Customers found it difficult to use. The website changes negatively affected other line items, Office Products.
Current Valuation:
Insider trading for 2012 to 2017
Discounted cash flow using a modest projected FCF is greater than current price.
Additionally, management is moving the right levers for a higher intrinsic valuation. By improving the productivity, profitability and capital structure it will lead to a higher intrinsic value.
Strategic formula/Dupont Formula/ROE = Profitability x Productivity x Capital Structure
As shown below PROFITABLITY (improving gross margins, FCF margins, reducing expenses).
Productivity is driven by improving asset turnovers such as DSO, cash conversion,inventory turns.
Debt, and shares outstanding drive the capital structure improvements. These 3 areas of improvement (Profitability x Productivity x Capital Structure) will lead to a higher stock price.
Financial line items below from 2011 to the most recent reported highlights improving valuations with decline in enterprise value.
Long CRVP
