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Is Lazydays Holdings a Hidden Gem Among the Bottom 100 Stocks to Buy?

Relaxing by the lake during summer by Max Harlynking via Unsplash

Finding something worthwhile to cover in Barchart’s Bottom 100 Stocks to Buy is not an easy task. Most are wildly speculative biotech stocks or businesses that have fallen from grace, barely hanging on.

On Monday, Lazydays Holdings (GORV) jumped into Barchart’s Bottom 100 Stocks to Buy in the 69th spot. Down 73% year-to-date, the operator of 14 RV dealerships once traded over $100.

Naturally, my first reaction is that this is a business ready for the garbage bin. Bankruptcy imminent. However, my curiosity has gotten the best of me.

While I have no understanding of the issues that have plagued its business, which have led to significant shareholder destruction, I can’t help but wonder if this is a hidden gem that speculative and patient investors should examine more closely.

Here’s my two cents.

The three most significant issues facing the company are excessive debt, poor sales, and compliance issues.

According to S&P Global Market Intelligence, Lazydays has an Altman-Z score of 0.88. The score indicates the likelihood of a bankruptcy within the next 24 months. A score of less than 1.81 is considered distressed and vulnerable to bankruptcy proceedings.

The company's net debt as of March 31 was $330.3 million, nearly 12 times its $28.2 million market cap. It has paid out $45.5 million in interest over the trailing 12 months, which is 5.9% of its $767.3 million in revenue.

Unsurprisingly, it generates an operating loss. There is some good news on this front. I’ll get to it shortly.

The second issue is poor sales.

In 2022, Lazydays’ sales reached $1.33 billion, the highest since the company went public via a special purpose acquisition company (SPAC) in 2018. The combination with Andina Acquisition II valued the business at $203.7 million or 6.9 times its 2017 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).

Lazydays’ 2016 sales were $564 million, generated from five dealerships, with $25.3 million in adjusted EBITDA. Its net debt of $91.6 million was a reasonable 45% of its enterprise value (EV) on a pro forma basis.

It went public to access growth capital. And grow it did, but at the expense of profits.

Lastly, as a result of the two previous issues, GORV stock collapsed, pushing its minimum bid price below $1 for 30 consecutive business days, thereby violating Nasdaq’s minimum bid price requirement. That notice was in January.

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