MAV Beauty Brands Inc

MAV Beauty Brands Inc (TSX: MAV) operates as a personal care company. The company’s products include various hair care, body care, and beauty products, such as shampoo, conditioner, hair styling products, treatments, vitamins, body wash, and body and hand lotion across various collections that each serve personalized consumer need.

Why Should Investor’s Exit?

• Higher balance sheet risk: The company is having higher debt in the balance sheet, which poses higher balance sheet risk to investor. The Debt/Equity ratio of the company as of September 30, 2021, stood at 0.97x compared to industry median of 0.22x. Moreover, debt protection matrix is also poor, with Net Debt is ~43.21x of its EBITDA as of September 30, 2021, whereas industry median is 7.82x.
• Lower cash conversion cycle: The company’s cash cycle is relatively higher compared to industry median, in Q3FY21 MAV’s cash cycle (days) stood at 303.9 days, whereas industry median stood at 143.2 days, which implies that the company is taking relatively more time to convert its investments in inventory and other resources into cash flows from sales. Also, on a sequential quarter basis cash cycle has increased from 251.2 days reported in Q2FY21.
• Stock hovering in a long-term bearish zone: MAV shares are hovering in a long-term bearish zone, where its shares traded well below its crucial long-term as well as short-term support levels of 50-day and 200-day SMAs, implies a bearish trend in the stock. Moreover, the leading momentum indicator, 14-day RSI is hovering in neutral zone, with bearish bias at 41.75.

Technical price chart (as on January 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

Stock recommendation

Given the penny cap market categorization of the company, investors are exposed to higher risks ranging from significantly leveraged balance sheet, poor debt protection metrices and poor financial performance of the company in the third quarter of FY21. Also from the technical standpoint, its shares are hovering in a long-term bearish zone. Hence, based on the above rationale, we recommend a “Sell” rating on “MAV” stock at the closing price of CAD 1.18 (as on January 14, 2022).

1-Year price chart (as on January 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

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