Who is Cricut?
Cricut
Cricut ($CRCT) is a creativity brand that provides tools, services, and a community to professionals and hobbyists. According to Cricut.com, they state “with our family of smart cutting machines, you can cut and create projects for home décor, parties and events, weddings, apparel, and more.” Their products include the Joy, Maker, Explore, Easy Press, and Mug Press that all seamlessly connect to their interactive smartphone application. With these products, people can design vinyl stickers, custom wood art, mugs, shirts, and all sorts of other fabrics. They also sell accessories such as their infusible ink, hand tools, and cutting boards. Their yearly memberships give customers access to thousands of designs and hundreds of fonts. With the wide variety of products and ease of use, they are a go-to choice for professionals and do-it-yourself enthusiasts.
Cricut
The boring, yet somehow exciting, financial statements
Cricut is not only designing cutting-edge technology for all things D.I.Y, but they are also making financial statements exciting again! Let us see how they do this in their income statement, balance sheet, and cash flow statement.
The somehow exciting income statement
In the SEC report filed upon their, IPO Cricut demonstrated outstanding financials. Some key metrics from the income statement include total revenue, gross profit, earnings per share (EPS), and earnings before interest, taxes, depreciation, and amortization (EBITDA). Revenue grew from $340 million in 2018, $487 million in 2019, and $959 million in 2020. That averages out to a 70% increase year to year. Gross profit showed similarities jumping from $111 million in 2018 to $332 million in 2020. EPS has steadily increased as well, as it sits at $31.16 per share. EBITDA, which is often used to compare to total earnings, has increased from $48 million in 2019 to $131 million in 2020. That is 171% year-over-year growth! These critical numbers show the companies ability to generate revenue and profit while at the same time expanding the company.
The not as exciting balance sheet
In the income statement, we saw how profitable the company was, but analyzing the balance sheet explains how the company is turning profits and balancing its assets and liabilities. Liabilities grew from $162 million to $197 million to $353 million from 2018 through 2020. While liabilities grew, so did their assets from $242 million, $318 million, $581 million respectively. The ratio between these went from 67% to 62%, to where it stands now at 61%. These ratios show that they have tried decreasing the amount of money borrowed to purchase these assets. Though a debt to asset ratio of 0.6 is not ideal, it is on the high end of what is acceptable, and the fact that it’s decreasing is promising. Current liabilities cover almost all of Cricut’s total liabilities, which means most of this money is spent on taxes, accounts payable (probably to suppliers), and payroll. This is good since it shows they don’t take out massive loans to fund their projects. Lastly, shareholder’s equity is at $164 million. This means that in the event of bankruptcy after all assets have been liquidated and all liabilities have been paid, there will still be $164 million to be left for the shareholders. That’s a whole lot of money to be leftover.
The most exciting part, the cash flow statement
The cash flow statements are pretty much in line with one anomaly in the financing activities. Cricut shows financing activities of $17.4 million, $10.9 million, and $109.6 million for the years 2018 to 2020. The jump to $109 million in 2020 was mainly due to the issuance of $51.2 million as dividends and $32.6 million as payment to credit lines. In 2020 they had $16.9 million as investing activities, they state, “all of which related to property and equipment acquisition or investment, software development and investment and product research and development.” The cash flow statements seem pretty in line with a company that is seeking growth opportunities. Okay, maybe we lied, the cash flow statement wasn’t very exciting, but this next metric truly is.
The key metric stirring up the talks
The biggest, most exciting, and most talked-about metric for Cricut is their price-to-earnings ratio (P/E). The P/E for Cricut is 0.65. Simply put, for every $0.65 you spend buying this stock, you can expect a $1.00 return one year later. For comparison, the P/E for the S&P 500 has ranged between 13 and 15 on average. For a company to be trading less than 1x, its earnings are incredible compared to other stocks such as Nvidia, trading at 88x earnings. According to investopedia.com, “a low P/E can indicate either that a company may currently be undervalued or that the company is doing exceptionally well relative to its past trends.” You can’t tell us that’s not exciting, okay, moving on. There could be some other underlying issues, and it’s never wise to buy a stock based on one metric, but it is an interesting piece of Cricut’s finances.
The business model built around the people
Cricut
Often we, as investors, get too locked into a company's financial statements, or is that just me? Anyways, Cricut offers a great business model that must also be analyzed. The company encourages creativity as a key aspect to growing their business. As their user grows, so does the business. They have invested a lot of time and money understanding their users, what they want, and what they need—doing this provided them with the information necessary to expand their company. For example, creating the mobile application provided users with a good source for ideas and allowed Cricut to add new features and tools. As their SEC documents say, the company is looking to grow with users, attract and engage new users, and drive innovation. Cricut has done an outstanding job understanding their users and learning how they can unlock their growth to drive the business’s finances.
A summary of Cricut
Okay, maybe we lost you when we talked about the finances; well, we're back to wrap it up. Cricut is an exciting company that really understands its users. By understanding their users, they can display outstanding growth, as demonstrated on their income statements. The management team has done an exceptional job managing debt and financing new projects, and their business model speaks to the user. Cricut is a great company and offers a lot to its users.
The Exciting Disclosure: This is not investment advice, and we do not pick or recommend any stocks to buy. All research is done for educational purposes, and each person should do their own research to make a decision on where to put their money.
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