Jamieson Wellness Inc (TSX: JWEL) is a Canada-based company, which operates as a health and wellness company. The Company develops, manufactures, and markets a brand of vitamins and natural health products. 

Key Highlights

• Long Cash Cycle days: The company is holding a higher Cash Cycle (Days) compared to the industry, implying the company takes more days to convert its inventory to cash. Currently, its Cash Cycle is at 214.7 days compared to an industry median of 127.0 days.

• Stretched valuations: JWEL shares are available at a Price/ Cash Flow multiple of 24.3x compared to the industry (Food & Tobacco) median of 14.1x and on NTM EV/EBITDA multiple it's trading at 13.0x against an industry median of 9.2x. This implies that the shares are overvalued against the industry. The respected stock is also overvalued on many other multiples mentioned below in the table. Higher valuations against an industry draw a caution line.

Source: REFINITIV, Analysis by Kalkine Group

• Higher average collection period: The company is having a higher average Accounts Receivable day of 73.5 days, against the industry median of 35.7 days. A higher average collection period indicates that the organization is collecting its payments at a slower pace. This may create a difficulty for the company to have enough cash on hand to meet its financial obligations.

Stock recommendation

The company finished the year with another quarter of growth, with an 11% gain in branded sales and a 15% increase in Adjusted EBITDA. Gains in the domestic segment fueled top-line growth, while margins expanded as a result of improved operational efficiencies, bolstering its market leadership. However, it has a lengthy Cash Cycle (Days), and its average A/R days are greater than the industry median, which might make it difficult for the firm to satisfy its financial commitments. Furthermore, the company has generated negative returns in the last three months and is trading at stretched valuations on various valuation parameters. On top of all the markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. Hence, based on the above rationales we recommend a “Watch” rating on the stock at the closing price of CAD 32.74 on February 24, 2022.

One-Year Technical Price Chart (as on February 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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