While CAWW Multibaggger Turnaround Candidate and CANOF Performance in Focus, a New Potential Data Center Play Emerges (GeoWire Weekly No. 146)

Welcome to The GeoWire , your source for a Peek into GeoInvesting’s Research Coverage, Microcap Stock Education, Case Studies, Featured Videos, and More. Please share this if you like today’s newsletter and comment with any feedback.

If you are new or this was shared with you, you can join our email list here.

For real time analysis of our coverage universe, including new high conviction ideas and additions to our model portfolios, if you are not already a premium subscriber, consider supporting our movement by becoming a premium member today. GeoInvesting, 16 years and counting!

Highlights

• KRT and QUIK Calls To Action in the BOP #11 and AI Screen, respectively.
• CAWW – Turnaround story progressing; Inflection appears to be set for Q4.
• CCEL – Continuing to monitor possible spin-off of infusion clinic business related to its relationship with Duke University.
• TGEN – More insider buying as Directors continue to add to already large positions.
• QEPC –  EPS for Q1 2025 grew 112% to $1.17.
• Has a new Data Center stock emerged?

—

After last week’s monster rally in the smaller cap market, the iShares Russell 2000 ETF (IWM) and the iShares Microcap ETF (IWC) slowed their momentum but still managed to close out the week ending July 19, 2024 up 1.74% and 1.69%, respectively. 

This should not be a surprise, given the magnitude of last week’s rally. Will the small cap indexes rebound in short order?  Actually, we really don’t care. The majority of stocks we follow are not represented in the smaller cap indexes, and are of higher quality than a good amount of stocks in the Russell, where as of mid-2024, approximately 40% of companies are currently losing money. 

With the S&P 500 Index (SPY) retracing 1.96%, the good news is that the larger cap indexes continued to show weakness. We would love that to continue because we believe this money would rotate into quality smaller capitalized stocks, where there is by comparison an extreme amount of undervaluation. 

Do you want to buy a large cap like CrowdStrike Holdings, Inc. (NASDAQ:CRWD), down a little more than 11% on the heels of a faulty cybersecurity update from the company causing significant disruptions in the medical and travel industries?

Compared to CRWD’s price to sales (P/S) ratio of 22.85x and a price to earnings (P/E) ratio of about 566x, wouldn’t you rather buy stocks selling at P/Es of less than 10x or 15x, and growing earnings at a pace of over 30%?

CAWW Turnaround getting close to inflecting; Valuation remains to be the wildcard

Let’s start out this week’s stock commentary with AWW, a “turnaround company” in our Run to $1 Model Portfolio that manufactures and markets health and beauty aids. GeoInvesting’s “Run to $1.00 Model Portfolio” (R21) focuses on microcap stocks trading under $1 per share that have the potential to exceed this threshold.

The newest product from CCA Industries is Neutein, a brain health supplement. Launched in the second quarter of fiscal 2024, Neutein is now available in 3,420 CVS stores across the country. This product is part of the company’s efforts to turn around their financial performance and is supported by a marketing campaign featuring NFL Hall of Fame football player Mike Singletary.

CAWW shares are up 87% since its inclusion in the R21 and actually briefly exceeded one dollar per share for a few trading days after Oprah Winfrey endorsed the “Plus White” brand from CCA Industries, Inc. The Plus White teeth whitening kit was selected as the 2024 Oprah Daily’s Editor’s Choice for teeth whitening. If you do a little digging, it looks like this might’ve been the first ever white teeth whitening product to be available in the US years ago.

For the fiscal Q2 2025 quarter ending May 31, 2025, the company recorded revenues of $2,210,566. This represented a decrease compared to the same quarter in the previous year, where revenues were $2,993,954. The net income for Q2 2025 was a loss of $24,421 ($0.00), which marked an improvement over the net loss of $133,069 ($0.02) recorded in Q2 2024. It’s important to keep in mind that last year‘s numbers included one of the company’s iconic brands, Bikini Zone, which was sold in October 2023 to pay off all of the company’s debt and raise some cash for a new marketing plan.

The numbers were obviously not lights out. However, this is in line with what we are expecting until the company gets some momentum selling its Neutein product through CVS locations and continues to accelerate its online marketing push.

Recall that when we published our initial research article on the company, on March 18, 2024, that before the new CEO came on board, online revenue across all products was minimal and now it represents 50% of revenue.  

And what was the the main takeaway from CAWW’s  press release? [MM_Member_Decision membershipID=’2|3|4|5|6|8|9|12′] It was that the company’s restructuring plan is finally getting the company closer to profitability. As a matter of fact, regarding profitability, the CEO felt comfortable stating that the fourth quarter would be the quarter of inflection.

I’m going to visit some of the CVS locations that are carrying the Neutein brand to see if I can gather any intel in terms of how the product might be selling.

For now, I took a stab at how the company’s earnings per share could play out over a certain range of revenue scenarios.

As this is a turnaround play, we don’t have clear visibility in terms of the level of revenue that the company can achieve from the current product lineup, but we do know at one point in its history, CAWW reported peak sales of about $60 million and earnings per share of around 80 cents.

Assuming the company can expand sales, the biggest factor in how excited we can get at the current stock price will be if the operating expenses as a percent of revenue can get back to where they were when the company was running at its peak. And, can they get there at lower revenue levels?

In terms of profits, CCA is right around breakeven. I wanted to see what could happen to profits if the company:

• Maintained its current gross margins of about 70%, which is materially higher vs. peak revenue years, but has been stable over the last several quarters.
• Can drive operating expenses as a percent of revenue to where they were years ago, when the company was humming, or around 50% vs.70%, where that percentage is at today.

CAWW EPS Scenarios

• At the low revenue assumption, a P/E of 15x to 25x would yield a price target range of $4.80 to $8.00
• At the low revenue assumption, a P/E of 15x to 25x would yield a price target range of $7.95 to  $13.25

The stock is currently trading at 93 cents. 

Obviously, this is all conjecture for now and if revenue does move in the right direction, we do not know how long it will take for them to arrive at my assumptions. We also do not know what unforeseen challenges the company might encounter along the way. 

But at least we can start to see how CAWW, even after rising 87% from our addition to the R21, has multibagger potential if the turnaround inflects. 

And now you know why I devote some of my capital to turnarounds. Remember, the choice for me with regards to investing in turnarounds is not yes or no,,, it’s weighting positions appropriately, so a bet does not break my portfolio if things go wrong, which is inevitable in turnarounds..

By the way, I assumed no operating leverage, a concept of which is partially discussed in this post, in my assumptions. However, I also did not assume that gross margins will decrease as revenues rise. Hopefully, as I continue to date CAWW, how these factors move with sales will become more evident.

Important Tweet on California Nanotechnologies Corp. (CNO.V) (CANOF)

On July 18, we issued the following tweet as shares of CANOF continued their pullback off the recent high of $0.88 reached on July 17, 2024.

Shares dipped to $0.60 during the week, but rebounded, closing the week at $0.69. The pullback was not unexpected, given the strong run it had from the last earnings report when shares were trading around $0.30.

Artificial Intelligence (AI) Screen Update

We added Quicklogic Corporation (NASDAQ:QUIK), a developer of circuit boards that  can be further customized by customers, to our “legitimate stocks” AI Screen, which was initially created on April 2, 2024. In our July 16 email, our Call to Action explained:

“…Given its strong 2025 EPS estimate, adding QUIK to our AI screen due to the stock’s sharp pullback. The company manufactures and sells chips that can be customized by end customers for AI, edge computing and other complex computing applications. EPS estimates for 2024 and 2025 of $0.47 and $0.65 respectively vs $0.17 in 2023 on strong top line growth.”

So far, the AI screen, where we try our best to only add stocks that are legitimate AI beneficiaries as opposed to the cabal of pump and dump suspects, has an average return of just over 32% across 15 names in about four months.

Buy on Pullback (BOP) #11 Model Portfolio Update

We removed Karat Packaging Inc. (NASDAQ:KRT) (Disposable Food Service Products) from the current buy and pullback model portfolio at a closing return of 32.41% due to estimates showing that earnings per share growth is going to be flattening out over the next two years.

So, currently, we’ve closed four positions, while 3 remain open:

• Fitlife Brands, Inc. (NASDAQ:FTLF), which is up 108.92%
• Intouch Insight Ltd (OTC:INXSF), which is finally holding in positive territory.
• Lifevantage Corporation (NASDAQ:LFVN), up 30.89%

The BOP #11 average return remained largely unchanged for the week, and is still up 36.42% (combining open and closed average returns) since its inception. 

Monster Earnings Per Share From QEPC And A New Microcap Data Center Play Sees More Insider Buying.

We saw some insider buying from a potentially new data center play discussed, Tecogen Inc. (OTC:TGEN), which has seen a lot of buying from Director John Hatsopolous, who’s been backing up the truck since the beginning of 2024 to the tune of 219,000 shares. 

The latest filing on July 15 came from Director Lewis Earl, who bought 10.000 Shares at $0.68. He has also been “quietly” adding shares since January, compiling 93,000 shares. Between the 2 directors, a total of 1.59 million shares are owned.

We will continue to monitor the TGEN story closely to see if the company’s liquid cooling technology can be aggressively implemented into data center infrastructure. You may recall that I reported that, during my site visit to Tss Inc (OTCQB:TSSI) headquarters a few weeks ago, the CEO mentioned that power solutions will be one of the top trends to watch in AI infrastructure buildout activities.

That being said, we think TGEN still has a long way to go to get itself into the AI fray.

Furthermore, the company is still losing money on its legacy business. The good news is that it is building a nice recurring revenue stream by entering into contracts to service its power solutions equipment installed at customer locations.

I’ll probably be making some suggestions to management on how they can get involved more aggressively in the AI theme. We will see how that goes!

[/MM_Member_Decision]

~ Maj Soueidan, Co-founder GeoInvesting

The remainder of this post is only visible to paid subscribers of GeoInvesting and can be accessed by Subscribing to GeoInvesting.

The post While CAWW Multibaggger Turnaround Candidate and CANOF Performance in Focus, A New Potential Data Center Play Emerges [GeoWire Weekly No. 146] appeared first on GeoInvesting.