Stock’s detail

Jamieson Wellness Inc.

JWEL Ready to Ride the Growth Wave: Jamieson Wellness Inc. (TO: JWEL) is engaged in manufacturing, distributing, and marketing of branded natural health products including vitamins, minerals, and supplements. Despite the soft market conditions, the stock of JWEL mounted up by 38% in the last one year.

Margin Expansion and Increased Earnings: The company has recently released the results for the 4^th quarter ending 31 December 2019, wherein it reported higher revenue, margin expansions and increase in earnings. During the period, the company witnessed an increase of 4.1% in revenue to CAD 103.3 million and a growth of 11.8% in EBITDA to CAD25.6 million. This was mainly due to brand segment strength and incremental efficiencies across the organization. The decent financial and operational performance enabled the Board to declare a quarterly dividend of CAD0.11 per common share, which is to be paid on 13 March 2020. In the coming years, the company is planning to advance its e-commerce efforts and is likely to enter the US markets.

Quarterly Financial Performance (Source: Company Reports)

Management Guidance: The company has established its initial outlook for FY20 and anticipates net revenue in the range of CAD364 to CAD376 million, reflecting a growth of 5.5% to 9.0%. JWEL is also anticipating EBITDA in between CAD80 to CAD84 million and adjusted diluted earnings per share in a range of CAD1.02 to CAD1.10.

Valuation Methodology: P/E Multiple Approach

P/E Multiple Based Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Shares of JWEL have delivered a price return of ~ 38% on YoY basis, and despite a bloodbath in the equity market across the board, its business model and strong fundamentals enabling it to sustain against the blow. Despite a steep sell-off on the TSX, its shares are still standing considerably above its long-term crucial support level of 200-day SMA and Price/200-day SMA ratio of the stock stood at 1.13x, which a favorable signal.  The Moving Average Convergence Divergence is hovering above the 9-day SMA signal line, with the gap between 12-day and 26-day Exponential Moving Average is positive, again a positive trend.

Despite challenging macro environment in FY19, on account of US-China trade war that dragged global economic growth, the group has recorded decent margin expansion and increased earnings as well in the same period. Also, China FDA recently allows foreign brands to explore the domestic market and the group has a leading position in China amongst international brands. This is further expected to support the group’s growth in near to medium term. The stock is currently trading at ~25x P/E (NTM) multiple. We expect this multiple to expand further based on the above-mentioned reason. Therefore, based on the above rationale and prevailing technical trend, we have given a “Buy” recommendation at the closing price of CAD 27.17 (as on March 11, March 2020).

1-Year daily price chart (as on March 11, 2020). Source: Thomson Reuters

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