What do consumers do when they want the latest fashion, but inflation has priced it out of range? Answer, buy “used”, but authenticated, jewelry and watches from a company like Envela (ELA).
Envela is in the “re-commerce” business operating in two segments. The first is consumer focused, and involves selling preowned luxury goods and metals. This includes high end jewelry, watches, and precious gems, as well as silver and gold. These items are sold through retail outlets and via its online presence.
The second line of business is commercially focused and involves recycling and/or refurbishing consumer electronics and commercial IT. It’s a fairly unique model for a publicly traded company.
If economic conditions continue to tighten and growth slows, Envela is in a great position, as sellers encountering tough economic conditions can liquidate their high end jewelry, but buyers seeking “value” have an option to still purchase high end goods.
CEO Loftus highlighted this point in ELAs latest earnings release stating, “We are confident that our retail expansion strategies will not only generate increased revenue, but also enhance our market position, and ultimately provide strong returns for our investors. Supported by our solid foundation of financial health, we are still in the early stages of expanding our store footprint.”
Envela presents a solid value here, with a PE of only just over 8, and trading at 8.4x earnings and 10x projected earnings. It possesses a strong balance sheet and good track record of sales and earnings growth.
ELA’s strongest rating component in our POWR Ratings is in the Sentiment category, which aligns with my thoughts around the company doing well in a challenging inflation and growth environment.
The stock is currently trading at the bottom of a long trading range dating back to late 2020, at just over $4. The stock has traded in the $8 range earlier this year, and could move back in that direction as demand for its products grows.
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ELA shares were unchanged in after-hours trading Thursday. Year-to-date, ELA has declined -22.62%, versus a 12.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Jay Soloff
Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.
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