By Steven Ralston, CFA
Last week, Guardian 8 Holdings (GRDH) announced the initial round of strategic hires for newly created sales director positions, each responsible for a 10-state region of the U.S. (West, Midwest and Southern). In the near future, Guardian 8 is expected to have a national sales presence as management anticipates to be hiring a sales director for the Atlantic territory (Virginia to upstate New York). Domestic sales directors will report to COO Paul Hughes.
From a separate company announcement in early January, the domestic sales effort ought to be assisted by a two-year agreement with the California Association of Licensed Security Agencies, Guards and Associates (CALSAGA). Under the arrangement, CALSAGA can provide its 90,000+ membership with the opportunity to purchase package deals of a Pro V2 unit, holster and instructor course training at an attractive bundle price point.
The international sales effort also expanded with distribution agreements having been signed with Techkomplekt (Russia) and Controles Graficos (Mexico). Techkomplekt has an exclusive distribution arrangement for G8 Pro V2 enhanced non-lethal (ENL) devices and has an initial $25,000 order pending upon the completion of the import customs clearance process. The non-exclusive distribution agreement with Controles Graficos is the second for Guardian 8 in Mexico. An initial $10,000 order is also subject to import clearance procedures. The international sales effort is being coordinated by Jose Rojas, VP of Customer Services.
Having paid a personal visit to the company’s headquarters in Scottsdale in mid-January, I can attest that units of the G8 Pro V2 are in stock and have been tested for both quality and functionality as part of the company’s Low Rate Initial Production (LRIP) phase. Initially, small production quantities of the Pro V2 are being thoroughly and individually tested to gain a confidence in the performance of the manufacturing process before mass production begins. The inventory build is being funded by the $2.0 million private placement in November 2013 and a $700,000 revolving line of credit with Cornerstone Bank of Overland Park, Kansas.
Our price target for Guardian 8 Holdings is based on price-to-sales (P/S) valuation methodology. Guardian 8 is a small-capitalization company, currently with negative profitability, but with an expected sales profile that should grow and expand over time as the company’s initial product begins to be deployed within the private security industry. Since Guardian 8 has the potential and is expected to generate meaningful revenues this year, our price target is based on a price-to-sales ratio valuation using estimated revenues for 2014. At a P/S ratio of 11.0 on this year’s projected sales of $4.3 million, our price target is $0.90.
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By Steven Ralston, CFA