1/12 Valuing a Disruptive Businesses: Naked Wines ($WINE) Case Study. In my intro last week, I promised examples of using ROIIC & reinvestment rate to value disruptors. $WINE is an eComm D2C wine model with SaaS-like outcomes. EXCELLENT DISCLOSURE makes it a good case study

It began as an online wine retailer with many SKUs/low loyalty, but then pivoted at a pivotal moment when a top exec realized a cohort of consumers were super loyal – those that enjoyed supporting independent winemakers. @_inpractise Feast your eyes on this glorious disclosure:

Naked Wines is forecast to report approximately zero EBIT this year. As we will see, the company is not worth zero, nor does it mean Value Investors are allowed to cavalierly toss it in the “too hard” pile. Here’s a way to value Naked Wines with discipline:

Variable (1): $WINE discloses Standstill EBIT, boosted by COVID. Loyalty of $WINE’s “angels” makes EBIT stickier than some other eComms. Astute SaaS observers will note revenue retention (I assume ~78% on avg) is below B2B SaaS (95-130%). My standstill NPV implies 6.3x EV/EBIT.

Variable (2): A disclosure triumph. If slides could talk, “we reject simpleton requests to under-invest & produce 123% IRR for shareholders that truly like value creation.” Value investors, note what the V stands for in LTV. PV it. I assume payback holds 5 yrs, then slow decay