It’s rare to ever find an OTC listed penny stock that is majority owned by a big board listed company. Even more rare is to find such a gem that has a low float, positive net income, and has just bounced off record lows just before the fall trading season is about to commence. If those parameters wet your palette to a point you see some sweetness in the coming weeks/months, then perhaps looking closer to what’s going on with operator and franchisor of self-serve frozen yogurt cafés, U-Swirl, Inc. (OTC PINK: SWRL), will be a treat for your portfolio.
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U-Swirl has a very unique business model, allowing customers a broad choice in frozen yogurt by providing an assortment of non-fat and low-fat flavors, 70 different topping choices like seasonal fresh fruit, sauces, candy and granola, and the ability to both serve themselves and pay by the ounce instead of by the cup size. Operating under the brand names U-SWIRL Frozen Yogurt, CherryBerry, Yogurtini, Fuzzy Peach, Aspen Leaf Yogurt, Yogli Mogli, Let’s Yo! and Josie’s Frozen Yogurt, 39% owner, Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF), provides a linkage towards bigger things which may one day come for their subsidiary.
Looking back at SWRL stock from just over a year ago, shares were declining from their above $1 share price, but had entered into 2015 with a bit of stability to them. Trading between 0.25 and 0.43, not much activity was occurring regularly enough to provoke any attention to what seemed like an asleep at the wheel penny stock.
The taste of SWRL shares turned sour in mid July after the company reported operating results for the three months ended May 31, 2015 which came in at $2.1 million, compared with approximately $2.5 million for the same period the year prior. Within those top line results, net sales derived from Company-owned self-serve frozen yogurt cafés were down -30%, to $1,030,957, in the first quarter of Fiscal 2016 which U-Swirl addressed as being caused by the sale of certain Company-owned locations.
Despite the decline in sales, U-Swirl reported positive net income, $279,344 or $0.01 per basic and diluted share, for the three months ended, just slightly lower in comparison to the $376,563, or $0.02 per basic and diluted share, reported during the same period the year prior. The next 23 trading sessions were abysmal for SWRL shares as, not only was trading volume consistent throughout the one month range, but the steep decline, mainly from insider sales, brought SWRL shares down to as low as 0.07.
From a “healthy choice” point of view, U-Swirl went into fiscal Q2 with $3,158,590 cash on hand and their parent company, Rocky Mountain Chocolate, has been raising dividends regularly which are now at a $0.12 quarterly pace. Not implying that RMCF could come in and start scooping up SWRL shares, especially since they are battling against rising cocoa prices, but with one particular insider taking his joint owned holdings down roughly 500,000 from nearly 4,000,000, which ranged from $0.252 to as low as $0.075, the reason for the decline in share price is, at least, identifiable.
Will the selling stop which is preventing SWRL shares from returning to above 0.25? It seems unlikely, but for those who can survive the storm by scooping up under 0.10 shares into their cup, the price per ounce should be cheap enough to enjoy the sweet tasting profits when the price of SWRL stock returns to normal levels.
Find out more about SWRL shares here: $SWRL
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