Goodfood Market Corp (TSX: FOOD) is a leading online grocery company in Canada, delivering fresh meal solutions and grocery items that make it easy for members from across Canada to enjoy delicious meals at home every day through its online platform.

Why Should Investors make an EXIT?

• Week performance in Q1 2022: The company started FY 2022, with week set of numbers where it witnessed lower sales and extended its net losses significantly. A huge increase in net loss was mainly due to lower net sales and gross profit as well as higher wages and salaries.

• Lower margin profile v/s Industry: In Q1 2022, the company failed on maintaining its pace and witnessed lower performance under operating margin matrix, consisting of gross margin, EBITDA margin, operating margin, and net margin, which exhibits the pressure on company.

Source: REFINITIV, Analysis by Kalkine Group

• Heavily leveraged: The company’s debt to equity ratio stood at 1.64x, which is too high against the industry median of 0.14x in Q1 2022. Additionally, its % LT Debt to Total Capital stood at 58.0% against the industry median of 16.0%. These factors imply higher balance sheet risks.
• Increasing uncertainties: The resurgence of Delta variant cases has raised a lot of questions, and it might have an influence on the company's operations and cash flows as the government may tighten some mandatory lockdowns to combat the spread.

Stock Recommendation

The company began FY 2022 with a set of data that showed reduced revenues and a large increase in net losses. Furthermore, the Delta and Omicron variants' return is wreaking havoc. Furthermore, it has a lower margin profile compared to the industry, indicating that the company is under a lot of pressure. Even the greater debt profile, which is expanding sequentially, indicates that the balance sheet is under stress. Hence, considering the aforesaid rationales, we have given a “Sell” recommendation in the stock at the closing price of CAD 3.26 on January 21, 2022.

Disclaimer

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