It is time again to write another article about Naked Brand Group (NASDAQ:NAKD), as potential investors have more reasons to skip the company and not buy shares of NAKD stock.

I wrote an article back in February 2021 titled “5 Key Reasons to Avoid Naked Brand Stock.”

The factors that supported my opinion to not buy NAKD stock included meme stocks are too risky, poor fundamentals, a risk of delisting and stock dilution.

Overall, my verdict a few months ago about NAKD stock was the meme stock’s risks were too severe.

Has anything changed to make me have a different opinion after financial analysis? The answer is no. All of the five factors mentioned a few months ago are still valid. And, there are some additional ones to discuss.

A Worse Valuation for NAKD Stock

In late February 2021 Naked Brand issued a press release about signing a definitive agreement for a $100 million private placement.

Company CEO Justin Davis-Rice said:

“This additional capital will further transform our balance sheet and now with $200 million in cash and no debt, this uniquely positions Naked to pursue strategic acquisitions that provide accretive value to shareholders.”

The good news is the balance sheet’s strength, but the bad news is the stock dilution. Also, cash itself is not an operating asset to produce revenue and profits unless it is used properly. Cash is positive, as the phrase “cash is king” is always too important.

But unless Naked Brand Group finds ways to invest the cash to support and expand its business operations, the cash raised is not making NAKD stock more valuable.

In a DCF model, for example, cash is not directly used to calculate the free cash flows to evaluate the intrinsic value of the stock. Rather it is applied when considering enterprise value and net debt.

I prefer companies have plenty of cash on their balance sheets from their core operations. This shows that the business model is working. Reliance on another stock offering indicates a possible loophole in the business model’s effectiveness.

Business Plan Doubts

The apparel company, meanwhile, says it plans to use the stock proceeds use the stock proceeds to switch to a digital-only platform.

The problem is that e-commerce business is highly competitive. Also, a digital transformation needs a lot of capital for marketing. There is a high risk of not producing the results expected. , meaning future sales can be worse than the business estimates.

Of course, future sales could be also better than expected. But if not, then the company will have to use a lot of its funds to support a troubled business plan.

Acquisition Plans Are Too Optimistic

When I read the following statement, I admit I was astonished. In the same press release mentioned above, it was stated, “This additional capital will further transform our balance sheet, and now with over $270 million in cash and no debt we are strategically positioned to pursue accretive acquisitions of high growth and cash flow positive businesses.”

I wonder how Naked Brand Group, with a weak financial performance history, can pursue potential acquisitions. It seems to be more than ambition and frankly wishful thinking.

For the past five years, revenue growth has been anemic, especially the past two years. There are net losses for the past five years and free cash flows were also negative for the same period.

Unless a company has a very strong balance sheet and a track record of business success, the idea of making acquisitions intensifies the riskiness of NAKD stock.

The Price of NAKD Stock

In January, NAKD stock was trading at about $1.65 per share. The excitement didn’t last too long. The stock was recently trading around 53 cents a share.

Avoid getting trapped by on-line forums and invest in this stock. The daily volume for NAKD stock has declined, showing a lack of interest from the market.

Moreover, the possibility of delisting from the stock exchange remains because its price is less than $1.

I find no reason why investors should buy the stock.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.