YB new stock pitches (Tue, Aug 5)

Purple Innovation (PRPL), a mattress company with $450M in annual revenue (down from $750M peak), is emerging from a housing market slump that has affected the furniture industry. Trading at just 0.19x P/S versus a peak of 1.8x, PRPL has shown momentum despite Q2 revenue being down 12% YoY. The company has $94M in debt plus $120M in lease obligations, with a 47% ownership stake held by Coliseum Capital, which provided a related party loan maturing in 2026. Management is guiding for positive adjusted EBITDA in H2 2025 after not turning a GAAP profit since 2021. Strong insider buying signals confidence, with the CEO ($350K), COO ($380K), General Counsel ($140K), and other executives purchasing shares. PRPL is expanding distribution through 12,000 Mattress Firm locations and 450 Costco stores. The company is entertaining acquisition offers, having received several unsolicited bids, making it a potential short squeeze candidate. With $238M in Net Operating Losses (3x current market cap) and a price target of $5 by 2027, PRPL could benefit from housing market recovery under the new Trump administration, though an earlier buyout at $1.00-$1.20 is possible.

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Baxter International (BAX), a $13B revenue medical technology leader specializing in IV solutions, infusion systems, and smart hospital beds, has declined 75% from its peak and now trades at less than 8x normalized FCF versus its historical 24x median. New CEO Andrew Hider, who tripled ATS Corporation's stock during his tenure, will take over in September 2025 with plans to expand operating margins to 16.5% by 2025 through cost-cutting, supply chain modernization, and accelerated R&D. The company benefits from robust market tailwinds across its segments, including IV solutions (8% CAGR), infusion pumps (7.4% CAGR), and connected care. Key risks include the Novum IQ infusion pump safety issues that led to FDA flags for under-infusion and over-infusion linked to serious injuries and deaths, potential regulatory headwinds, and hospital spending cuts during a recession. With the $3B proceeds from its Vantive spin-off, simplified operations, and expected revenue growth of 5% annually to reach $12.7B by 2028, BAX could generate $1.78B in free cash flow with 14% margins, supporting a $76.19 price target (250% upside) at a conservative 22x FCF multiple.

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Perma-Fix Environmental Services (PESI) presents a compelling investment opportunity with 365% upside potential (price target of $51.50) and maximum downside of 43%, driven by two transformative special situations. The first is a confirmed DOE effluent treatment contract starting August 2025, which will add $88 million in annual revenue (approximately 3x current revenue) from processing 2.2 million gallons of waste at $40/gallon. The second is a probable 2029 grouting contract that could add another $150 million annually from treating 1.5 million gallons at $100/gallon. PESI's significant geographical moat (its facility is 40km from the Hanford site versus competitors being at least 1,600 miles away) makes it the logical choice for both contracts, as transporting nuclear waste across multiple states poses excessive risk. By 2028, these two catalysts are expected to generate $222 million in new revenue with 10% EBITDA margins, yet the stock trades at just 1.45x estimated EBITDA. The company's Richland facility has plans to scale grouting capacity from 400,000 to 3 million gallons annually within 24 months of DOE approval, and despite market skepticism about DOE timelines, progress on infrastructure and early revenue recognition ($2 million already booked) indicate the project is on track.

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