Environmental, social, and governance, also known as ESG, are non-financial factors that investors are increasingly aware of when investing. These companies are certified B-Corporations, meaning that they value environmental and social factors with shareholder values. We delve into two companies balancing ESG factors with promising underlying businesses and could be a good buy today.
Warby Parker: Bull v.s. Bear Arguments:
Warby Parker (NYSE: WRBY) is an American direct-to-consumer online retailer of prescription glasses and sunglasses. The company has been founder-led since its founding in 2010 by co-CEOs Neil Blumenthal and David Gilboa.
Its founders wanted to “demonstrate that a business can scale, be profitable, and do good in the world without charging a premium”. It appears to be doing just that and reported a revenue increase of 32% year-over-year in Q3 2020, reaching $137.4 million with high gross margins of 58%. It also has an industry-leading net promoter score of 83 and a customer retention rate of nearly 100% over two years from the initial purchase, demonstrating customer loyalty.
The company has a ‘Buy A Pair, Give A Pair’ program for its glasses, which has undoubtedly had a substantial social impact, with over eight million glasses donated to people in need since its founding. Warby Parker is also committed to helping the environment and is carbon neutral.
Today, roughly 95% of its sales come from glasses, with the remainder from contact lenses, eye accessories, and eye exams. This leaves an opportunity to grow into a holistic vision care specialist, and new developments such as its telehealth eye tests demonstrate this.
Warby Parker is operating at a loss that totaled $91.1 million in Q3, primarily driven by an increase in stock-based compensation, along with its cost of acquisition rising. The company also faces competition from eyewear giant EssilorLuxottica.
AppHarvest: Bull v.s. Bear Arguments:
AppHarvest (NASDAQ: APPH) is an applied technology company building indoor farms and operates a 60-acre greenhouse facility in Appalachia and went public through a SPAC merger in 2021.
AppHarvest is attempting to build indoor farms that produce 30 times more food with 90% less water in a controlled acre than on a traditionally farmed one. This is critical as climate change impacts the environment and the global population increases. Its location means that it is located within a day’s drive of over two-thirds of the U.S. population which helps to reduce fuel costs.
The company aims to have 12 high-tech farms by 2025, with five already mapped out, and plans to expand internationally in the long term. Its leafy greens and berry facility should also be operational by the end of 2022. Provided it can execute, its revenue of $543,000 in Q3 2021 will be a mere drop in the ocean.
An investment in AppHarvest will require patience as the thesis plays out, and there will be obstacles. One present risk is that it only produces tomatoes, and these were of a lower quality than previously forecast, resulting in a lower price received. It is also hemorrhaging cash with a net loss of $17.3 million in Q3.
Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.