Investing in GROM: Is This Stock a Good Choice?

By Duncan Ferris

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Grom Social Enterprises (NASDAQ: GROM) shares are soaring, so we take a look at whether the stock seems like a good investment.

Grom Social Enterprises (NASDAQ: GROM) has seen its share price leap by more than 50% in early trading on Friday. But why is this small cap on the rise and is it worth your attention?

What is Grom?

Grom was incorporated in 2021 and operates as a media, technology, and entertainment company that focuses on delivering content in the United States.

The Boca Raton-based company operates a social media network for children under the age of 13 years. It also produces animated films and televisions series; and provides web filtering services to schools and government agencies.

Why is Grom’s Share Price Climbing?

Some sources list Grom’s next earnings update as being on Monday and it looks like investors are anticipating a strong performance from the company.

However, the company’s leadership has stated its fourth quarter and full year earnings are likely not to be released until April.

This was mentioned in an interview with the company’s CEO, Darren Marks, and President, Paul Ward, on TraderNewsSource. During this discussion, the duo explained that the company’s Top Draw animation production business was returning to pre-pandemic levels of operation and indicated that margin improvements lay ahead.

For example, the interview saw Marks comment: 

“As new, ancillary revenue streams come to life, we expect to see improvement and increased performance that will ultimately flow through to gross profits and overall operating income.”

Additionally, the duo touted the company’s links to big entertainment names like Disney, Dreamworks and Warner Brothers.

In short, the emergence of these confident and promising assertions coming so close to the company’s earnings release appears to have excited investors.

Grom’s Financial Metrics

Market Cap: $18.21m

P/BV: 0.47

Cash and Cash Equivalents: $9.1m

Total Current Liabilities: $3.83m

Total Liabilities: $5.71m 

Beyond this, the company most recent earnings, which were released in November, showed modest sales growth of around 5% to $1.51m. Additionally, the three-month period saw the business return a loss per share of $0.21 as total operating expenses almost doubled to $2.93m. 

Is GROM a Good Investment?

While it’s always nice to hear confidence from a company’s top brass, speculatively snapping up stock just ahead of an earnings release on their say so is not necessarily a wise move. 

The positive words from the company’s leadership may well indicate a strong performance and path ahead, but the leadership are hardly likely to reveal any skeletons in the business’ closet.

Essentially, this looks like good PR but without access to the numbers this stock is far from a safe bet.

On the other hand, the stock is very cheap and has declined by more than 30% across the year to date even with Friday’s explosion in share price taken into account. As such, buying the stock at this point is a risk, but might be a chance to pick up an undervalued investment with strong earnings just around the corner.

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Topics:
Entertainment
Social Media Platforms
Industries:
Communication Services
Companies:
Grom Social Enterprises

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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