One Small Cap Consumer Defensive Stock Under the Radar – JWEL

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

Key highlights 

• Robust financial performance: The company reported an impressive financial performance driven by quality production capabilities and strategic partnerships, along with the product presence across more than 45 countries. From FY17 to FY21, the group’s revenue grew at a CAGR of 10.6%, while its adjusted EBITDA recorded a CAGR of 13% for the same tenure.

Source: Company Presentation

• Growing International presence: The company has registered a healthy growth within the international segment through brand recognition, quality and strong distribution network. The group’s international revenue also witnessed a robust revenue growth between 2017 to 2021, which grew at a CAGR of 29.2% respectively. Furthermore, the company expects growth will be driven by expansion across key regions in Asia, Europe and the Middle East, while continuing to drive accelerated growth in China as we increase our local capabilities and brand investments in market.

Source: Company Presentation

• Guidance on higher revenue for FY2022: The management expects its revenue for FY2022to range between CAD 474 and CAD 491 million, reflects strong demand for its branded products both domestically and internationally. The guidance reflects the annual revenue growth of 5% to 9%. They also raised the expected figures of Adjusted EBITDA and EPS in a range of CAD 108 and CAD 112 million and CAD1.42 to CAD1.48, respectively.

• Higher Cash Flows from operating activities:In FY 2021, the company’s generated cash flows from operating activities stood at CAD 44.4 million compared to CAD 40.5 million for the same period in the prior year. An increase was primarily driven due to higher earnings.

Risks associated with investment: Delay in the company's products' regulatory approvals might dampen its product pipeline, which might impact the company's overall performance. Furthermore, some other risks are also present like Consumer Trends, Competition, supply chain, raw material prices, foreign exchange, etc.

Financial overview of FY 2021 (In 000 of CAD)

Source: Company Filing 

• The company reported higher sales, increased by 11.7% to CAD 451.0 million in FY 2021, against CAD 403.6 million in the previous corresponding period. The rise in revenue was driven by 8.5% growth in Jamieson Brands revenue and 23.6% growth in Strategic Partners revenue year-over-year.

• Earnings from operation stood at CAD 76.0 million, compared to CAD 63.5 million in pcp. Higher revenue was the sole reason behind higher earnings from the operation, partially offset by a rise in the cost of sales and higher S&A expenses.

• The company's net income also stood higher at CAD 52.0 million, increased by 26%, against CAD 41.5 million in the previous corresponding period.

Valuation Methodology (Illustrative): EV to Sales Based Valuation

Analysis by Kalkine Group

Stock recommendation

Throughout 2021, The company continued focusing on operational excellence and leveraging its portfolio of high-quality, innovative products across multiple channels, globally. It closed out the year with another quarter of growth, including an 11% increase in branded revenue and a 15% increase in Adjusted EBITDA. The company’s market leadership was bolstered by gains in the domestic segment fueling top line growth and saw margin expansion behind increased operating efficiencies. 

Based on strong demand for their branded products both domestically and internationally, the management expects its revenue for FY2022 to range between CAD 474 – 494 million, reflecting annual revenue growth of 5% to 9%, looks encouraging. Hence considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of JWEL at the last closing price of CAD 34.29 on March 28, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on March 29, 2022). Source: Kalkine, Analysis by Kalkine Group

Technical Analysis Summary

Disclaimer

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