PROFIT MARGIN: [FAIL]
This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. KONA's profit margin of 1.34% fails this test.
RELATIVE STRENGTH: [FAIL]
The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. Although KONA's relative strength of 88 is below the acceptable level, yet it is very close. Keep an eye on the stock as it could move into the acceptable range.
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL]
Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for KONA (-38.89% for EPS, and 15.85% for Sales) are not good enough to pass.
INSIDER HOLDINGS: [PASS]
KONA's insiders should own at least 10% (they own 32.84% ) of the company's outstanding shares which is the minimum required. A high percentage typically indicates that the insiders are confident that the company will do well.
CASH FLOW FROM OPERATIONS: [FAIL]
A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. KONA's free cash flow of $-0.57 per share fails this test.
PROFIT MARGIN CONSISTENCY: [PASS]
KONA's profit margin has been consistent or even increasing over the past three years (Current year: 2.76%, Last year: 4.99%, Two years ago: 2.17%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise.
R&D AS A PERCENTAGE OF SALES: [NEUTRAL]
This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in KONA's case.
CASH AND CASH EQUIVALENTS: [FAIL]
Unfortunately, the data is unavailable for KONA. Hence, an opinion cannot be rendered.
ACCOUNT RECEIVABLE TO SALES: [PASS]
This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for KONA was 0.30% last year, while for this year it is 0.85%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.
LONG TERM DEBT/EQUITY RATIO: [PASS]
KONA's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow.
"THE FOOL RATIO" (P/E TO GROWTH): [FAIL]
The "Fool Ratio" is an extremely important aspect of this analysis. Unfortunately, KONA's "Fool Ratio" is not available due to a lack of one or more important figures. Hence, an opinion cannot be given at this time.
The following criteria for KONA are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: [PASS]
KONA has not been significantly increasing the number of shares outstanding within recent years which is a good sign. KONA currently has 9.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock.
Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. KONA's sales of $106.5 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". KONA passes the sales test.
DAILY DOLLAR VOLUME: [FAIL]
KONA does not meet the Daily Dollar Volume (DDV of $0.0 million) test. It is required that this number be greater than $1 million and less than $25 million because these are the stocks that are liquid but remain relatively undiscovered by institutions. KONA is too illiquid to be considered attractive at this time.
This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. KONA's price is not currently available. Therefore the current price cannot be evaluated at this time.
INCOME TAX PERCENTAGE: [FAIL]
KONA's income tax paid expressed as a percentage of pretax income either this year (5.90%) or last year (0.76%) is below 20% which is cause for concern. Because the tax rate is below 20% this could mean that the earnings that were reported are unrealistically inflated due to the lower level of income tax paid. However, we have utilized a sophisticated formula so that the appropriate figures reflect a 'normal' tax rate (35%).