Struggling nutraceutical specialist Smart for Life (NASDAQ:SMFL) saw shares pop dramatically on Monday before paring back a large chunk of the gains. Earlier this morning, management announced the acquisition of an e-commerce nutraceutical enterprise. While the move could help boost revenue, SMFL stock remains a highly speculative investment.
According to a press release, Smart for Life has executed a definitive agreement to acquire Purely Optimal Nutrition. Smart for Life founder and Chairman A.J. Cervantes, Jr. believes that the acquisition will “accelerate revenue growth and meaningfully expand margins even further.”
CEO Darren Minton added context to the deal:
“Purely Optimal is currently generating estimated revenue in excess of $8 million and over $1 million of Adjusted EBITDA for the trailing twelve months […] We believe that Smart for Life can help further support and monetize that customer base with some substantial brand extensions.”
SMFL Stock Still Faces Significant Hurdles
Another factor benefiting SMFL stock centers on the underlying addressable market. According to Grand View Research, the global nutraceuticals market reached a valuation of $317.22 billion last year. The sector could also expand at a compound annual growth rate (CAGR) of 9.6% from 2024 to 2030. At the culmination of the forecast period, the industry could be worth $599.71 billion.
While that’s encouraging for Smart for Life, the issue for SMFL stock centers on viability. Over the past few years, the company has expanded its net loss. Therefore, it doesn’t immediately offer a credible path to profitability.
On top of that, investment data aggregator Gurufocus warns that SMFL stock suffers from six red flags. These warning signs include the continued issuance of new debt and an Altman Z-Score that reads 5.29 points below parity, implying heightened bankruptcy risk.
Why It Matters
Currently, no analysts cover SMFL stock on TipRanks, likely due to the extreme volatility. While shares were up 150% earlier today, they’re now up by only about 40%. Further, since the beginning of this year, Smart for Life has lost almost 60% of equity value. Currently, its market capitalization stands at a little over $540,000.
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On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
