InvestorPlace’s Josh Enomoto recently called Naked Brand Group (NASDAQ:NAKD) “almost completely irrelevant.” I would go a step further and suggest NAKD stock should not be traded on the public markets.
Seriously, why is Naked Brand still a public company? Anybody?
There Are Countless Better Options Than NAKD
I did a quick screen of stocks trading under $2. I came up with 507 options, 477 of which have a bigger market capitalization than NAKD. Going one step further, by eliminating all stocks under a $50-million market cap, I narrowed my search to 163 possibilities.
For anyone but the most dedicated buyer of penny stocks, you probably should stick to this exclusive group of low-priced stocks. And even then, the risks you’ll face owning one of these babies is off the charts.
However, before I throw out a couple of low-priced stocks to buy instead of NAKD, I should go over the maker of intimate apparel’s financial situation.
In a nutshell, Naked Brand generated net sales of $27.6 million in the first six months of fiscal 2020, losing $10.1 million on an adjusted EBITDA basis. In terms of its financial strength, the company has an Altman Z-score of -3.19. Anything below 1.81 suggests it could go bankrupt within the next 24 months.
Needless to say, when it comes to the NAKD stock price, there’s little I can see that merits further investigation. In the meantime, here are two low-priced stocks worth taking a closer look.
A Couple of Cannabis Companies
Of the 163 companies, 53 are in the healthcare sector.
The two that jump out at me are Aurora Cannabis (NYSE:ACB) and Hexo (NYSE:HEXO), two of Canada’s major cannabis players. Both have taken it on the chin in the past year — down 64% and 66%, respectively, over the past 52 weeks — but both have significant upside potential, making the inherent risks a little more palatable.
That said, do not invest in these companies if you can’t afford to lose your entire investment.
When it comes to Aurora Cannabis, it had so much going for it entering 2019. Yet here we are a year later, and some experts are suggesting ACB stock could go to $0. Of the last six articles written about the Alberta company by InvestorPlace contributors, only Wayne Duggan has said anything remotely positive.
Duggan believes that despite its current problems, Aurora’s products have value, making future capital raises, whether through debt or equity, a certainty. However, even then, he calls ACB “too dangerous to own at this point.”
As for Hexo, the prognosis isn’t much better.
In December, I stated that Cannabis 2.0 would ride to the rescue in 2020, as the company’s Truss joint venture with Molson Coors (NYSE:TAP) would start to pay dividends. Sure, the beer company itself is laying off 400 to 500 people, but the fact it’s changed its corporate name to Molson Coors Beverage Co. says all you need to know about its commitment to Truss and cannabis.
Of the two cannabis stocks, I see Hexo as the better buy.
A Poor Man’s Peloton
Anyone who’s followed Nautilus (NYSE:NLS) over the years would know that this is a sporting goods company with a checkered past. In March 2009, at the bottom of the correction, Nautilus stock traded for less than 50 cents. It then rose to $25 in September 2016 before gradually working its way down to under $2 over the next three years.
Things have not gone well for Nautilus in recent quarters. In Q3 2019, Nautilus had an operating loss of $8.3 million (down 234% year-over-year) on sales of $61.7 million (down 32% YOY).
However, help is on the way.
On Dec. 11, Nautilus announced that it had hired Aina Konold as the company’s CFO. Konold’s latest job was vice president of finance for Gap (NYSE:GPS). Nautilus CEO Jim Barr believes Konold’s understanding of omnichannel business models will help the company return to profitability and reignite its growth story.
I like Nautilus’ risk/reward profile and will continue to watch its progress over the next few months.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.