Grocery Outlet (GO), mcap=$2.7bn, price $28.21 vs $28.40

GO pitch:
– Extreme value grocery retailer of branded goods with 430 stores mainly in the 5 Western states.
– Attractive unit economics with 30% IRR.
– Long growth runway with the potential of 1,500 additional stores in their current markets and 4,500 stores nationally.
– For comparison, Aldi with a similar business has ~2,000 stores across 37 states mostly in the eastern half of the US.
– GO plans to keep a ~10% new store opening cadence translating into lucrative re-investment opportunities for several years.
– The cash flow generation from the existing stores and its healthy balance sheet should be sufficient to fund future store growth.

GO valuation:

– Trades at 14x EBITDA with earnings set to grow at 10%-15% levels going forward.

Exp. gain:
Mid to high teens IRR over the next 5 years.

Full write-up (free guest account required):