Agreed -- 2021 is shaping up to be very exciting indeed for CLB and its shareholders.
I'm excited that Candy Club is pushing the growth lever at 100% right now.
Early in a businesses development, such as with CLB, it makes sense to push growth and reward customers disproportionately because customer referrals and repeat business are so essential to the development of a valuable franchise.
With maturity, in time this bias can be reduced and shareholders can reasonably take a greater slice of the pie as profits. Too much, however, and the moat is drained with negative consequences for longevity.
The temptations of pushing for profitability are enormous because capital markets will reward profiteering. There are many examples of companies which ‘harvest’ excessively when perhaps they should focus on longevity.
This is what happened at Coca Cola when it leant excessively on bottlers, or Gillette where advertising was cut, or even at Home Depot which has boosted gross margin in recent years.
Ultimately, a business like CLB needs to push growth at the expense of profits in the short term, because once the time comes and CLB has a massive loyal customer base, the growth lever can be pulled back and the cash taps can be turned on.
At that point, it will be like the contents of the Hoover dam trying to fit through a garden hose.... a cashflow machine.
2021 is shaping up to be a big one.
Merry Xmas all,
T.E.P.
CLB Price at posting:
13.0¢ Sentiment: Buy Disclosure: Held
(20min delay)