This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

E-Cigarettes Are Smoking the Competition: Part 2


Victory believes the newly merged entity of Victory and Fin will have sales of $100 million in 2014. Assuming Victory can reach $500 million in revenues by 2018, applying an enterprise value-to-sales of 3.2 times would lead to a fair enterprise value of $1.6 billion. Victory's current enterprise value is $654 million leading to upside of 144% over the next five years, or a 20% annualized return.

Vapor had sales of $23 million over the trailing 12 months. Assuming Vapor is able to double revenues to $50 million in 2014, and --like Victory -- has a fivefold increase in revenue over the next five years, at the end of 2018 Vapor's revenue will be $250 million. Applying an enterprise value to sales of 3.2 times, Vapor's fair value in 2018 is roughly $800 million. With a current enterprise value of approximately $100 million, Vapor's up side is 660% over the next five years, or a 46% annualized return.

Investing Decisions

The three pure plays in the e-cig industry are all traded in the OTC marketplace at present.

They are all very speculative. There are severe risk factors, such as federal, state and local regulation and/or taxation.

Rumors fly every day -- be very careful when you enter orders on these three OTC-listed stocks.

It is very important that you enter limit orders -- and if you miss it, you miss it.

However, we believe that a 5% position in the group of three is warranted at this time. If you want to be conservative, invest in the major cigarette manufacturers that have entered the e-cig business as a hedge.

The e-cigarette market is growing at a very rapid pace. The big tobacco players are entering the market and are a way to play this sector.

In the short term, e-cigarettes will not alter the performance of these players. In the long run, these companies must position themselves so the disruptive technology that is e-cigarettes does not threaten their survival.

For more focused access to the e-cigarette market, Victory Electronic Cigarettes, Vapor and mCig are  over-the-counter pure plays. These stocks are more risky, but the growth in the e-cigarettes market will significantly increase the intrinsic value of these players.

Victory is pricing in much more growth than Vapor due to its international expansion and strong management team. Victory's recently announced  acquisitions might take their current run rate over $100 million in revenues in 2014.

Vapor has one of the largest retail distribution networks in the United States (third to Lorillard and NJOY) and is much more modestly valued by the market.

In the long run, I see e-cigarettes smoking traditional tobacco in the marketplace.

Harris Shapiro is the publisher of The Focused Stock Trader.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

3 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs