Jamieson Wellness: Still Cheap Despite Sharp Rally

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Jamieson Wellness is a Canadian leader in vitamins, minerals and supplements expanding internationally.The company's shares rebounded sharply following a decent third quarter earnings, as JWEL raised ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nJamieson Wellness: Still Cheap Despite Sharp Rally\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-01-09 09:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4661795-jamieson-wellness-still-cheap-despite-sharp-rally><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Jamieson Wellness is a Canadian leader in vitamins, minerals and supplements expanding internationally.The company's shares rebounded sharply following a decent third quarter earnings, as JWEL raised ...</p>\n\n<a href=\"https://seekingalpha.com/article/4661795-jamieson-wellness-still-cheap-despite-sharp-rally\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4200","symbol_name":"专卖店","start_time":0,"source_url":"https://seekingalpha.com/article/4661795-jamieson-wellness-still-cheap-despite-sharp-rally","article_id":"2402946439","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2402946439","pubTimestamp":1704764162,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Figure 3 - Jamieson's stock rebounded sharply  Third Quarter Consistent But Unspectacular At a high level, Jamieson's third quarter showed resilient performance, with revenues growing 9.1% YoY to $152 million while adj. EBITDA grew 8.7% YoY to $32 million. However, adj. diluted EPS growth was muted at just 2.9% YoY to $0.35 .    Figure 4 - JWEL Q3/23 financial summary  Looking at the results in detail, Canadian revenues declined 4.6% YoY to $76 million due to difficult comparisons from Q3/2022, while U.S. revenues grew 88.1% YoY to $33 million due to new products, distribution gains and the timing of orders. Revenues in China grew 52.5% YoY to $12 million, driven by continued strong demand and new distribution partners. As we have mentioned previously, the U.S. remains a large market for Jamieson, primed for market share gains .   Figure 5 - U.S. remains a huge opportunity  Meanwhile, Jamieson continues to grow strongly in China, driven by the company's reputation in the minds of the C","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4200":"专卖店","JWEL":"聚好商城","BK4122":"互联网与直销零售"},"translate_title":"Jamieson Wellness：尽管大幅上涨，但仍然便宜","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"JWEL":0.9},"content_text":"Jamieson Wellness is a Canadian leader in vitamins, minerals and supplements expanding internationally.The company's shares rebounded sharply following a decent third quarter earnings, as JWEL raised guidance and announced a large buyback program.Looking forward, JWEL's shares continue to screen attractive, trading at 16.4x Fwd P/E, a discount to consumer staple peers.   Yana Tatevosian A few months ago, I wrote a follow-up article on Jamieson Wellness (TSX:JWEL:CA), reiterating my buy recommendation on a reset in the company's valuation and unchanged long-term growth prospects. Since my article, Jamieson has performed extremely well, returning almost 30% and outperforming the markets (Figure 1).   Figure 1 - Jamieson has performed well since October (Seeking Alpha) As we step into 2024, let us review the company's most recent quarterly results and check up on the story, to see if there are any catalysts to push Jamieson's stock even higher. Brief Company Overview Jamieson Wellness is a Canadian leader in vitamins, minerals and supplements (\"VMS\"). Its products are manufactured in-house and are distributed via over 10,000 retail locations and major ecommerce platforms. Jamieson also entered the U.S. market via its youtheory acquisition and has been expanding sales overseas, with its products available in over 50 countries globally (Figure 2).   Figure 2 - Jamieson overview (JWEL investor presentation) Sharp Rebound In Shares Since October Since my article in October, Jamieson's stock has seen a sharp rebound, coinciding with the company's fiscal third quarter earnings report on November 2nd (Figure 3). What was so special about the quarterly earnings to spark JWEL's dramatic rally?   Figure 3 - Jamieson's stock rebounded sharply (stockcharts.com) Third Quarter Consistent But Unspectacular At a high level, Jamieson's third quarter showed resilient performance, with revenues growing 9.1% YoY to $152 million while adj. EBITDA grew 8.7% YoY to $32 million. However, adj. diluted EPS growth was muted at just 2.9% YoY to $0.35 (Figure 4).    Figure 4 - JWEL Q3/23 financial summary (JWEL investor presentation) Looking at the results in detail, Canadian revenues declined 4.6% YoY to $76 million due to difficult comparisons from Q3/2022, while U.S. revenues grew 88.1% YoY to $33 million due to new products, distribution gains and the timing of orders. Revenues in China grew 52.5% YoY to $12 million, driven by continued strong demand and new distribution partners. As we have mentioned previously, the U.S. remains a large market for Jamieson, primed for market share gains (Figure 5).   Figure 5 - U.S. remains a huge opportunity (JWEL investor presentation) Meanwhile, Jamieson continues to grow strongly in China, driven by the company's reputation in the minds of the Chinese consumer (Figure 6).     Figure 6 - JWEL continues to grow strongly in China (JWEL investor presentation) Raises Full Year Guidance But Still Weaker Than Initial Estimates Concurrent with the quarterly results, Jamieson also raised the lower end of its revenue guidance, with 2023 revenues now expected to range between $680-690 million (Figure 7). However, adj. EBITDA and EPS guidance was maintained.   Figure 7 - JWEL updated guidance (JWEL investor presentation) Readers should note that when the company released its second quarter results back in August 2023, Jamieson lowered full-year 2023 guidance to $670 - 690 million in revenues, $140 - 144 million in adj. EBITDA and $1.56 - 1.63 in adj. EPS, causing a 15% plunge in JWEL's share price. So the latest upgrade is simply restoring some of the previously reduced guidance. The main driver behind JWEL's guidance upgrade is the youtheory business segment, where JWEL raised the revenue range from $145 - 155 million to $150 - 155 million. Despite the upgraded guidance at youtheory, readers should note that performance should still be considered weak relative to the initial estimates when Jamieson bought the business. Jamieson had trumpeted 'pro forma' 2022 revenues of $155 - 159 million for youtheory when it announced the acquisition in June 2022, so the latest guidance for $150-155 million in 2023 revenues is still disappointing. Overall, Jamieson's third quarter showed resilience in revenues, with some positive signs at youtheory. However, there was nothing financially that would have foretold the strong stock reaction. Buyback Spur Stock Rally I believe the major catalyst behind Jamieson's stock rally was the announcement of a large buyback program where Jamieson's board authorized the repurchase of up to ~10% of outstanding shares for cancellation. Under the terms of the normal course issuer bid (\"NCIB\"), Jamieson can repurchase up to 25% of the average daily trading volume on the open markets. With the buyback program in effect until November 2024, I expect Jamieson's shares to see continued support in the coming quarters, unless financial performance surprises negatively. Valuation Remains At A Discount To Peers Jamieson's buyback announcement concurred with my assessment of the company's cheap valuation. In my prior article, I noted that JWEL was trading at only 15.4x 2023 consensus EPS estimate of $1.59, a discount to Consumer Staple peers at 16.9x. Even with the stock's strong rally in the past few months, Jamieson continues to trade at an attractive valuation discount. JWEL is currently trading at 16.3x 2024 EPS estimate of $1.86, while Consumer Staple peers are trading at 18.9x Fwd P/E (Figure 8).   Figure 8 - JWEL earnings estimates (Seeking Alpha) This suggest there continues to be upside to Jamieson's stock price. I estimate fair value for Jamieson is approximately 19x Fwd P/E, or ~$35 / share. Key Risk Is Margins Looking forward, I believe the key risk to Jamieson's shares is margins. Looking at consensus estimates, analysts expect Jamieson to grow earnings 15.5% YoY to $1.86 in 2024 while the topline is only expected to grow 6.5% to $729 million (Figure 9).   Figure 9 - JWEL consensus estimates (tikr.com) To hit consensus estimates, Jamieson's EBITDA margins will have to expand from 2023's guidance of 20.7% to over 21% in 2024. Fortunately, Jamieson appear on track to hit that target, as Q3/2023 adj. EBITDA margin was 21.0%, significantly better than YTD 2023 adj. EBITDA margins of 19.2%. Debt May Also Be A Headwind Another headwind facing Jamieson is interest expenses. Jamieson's interest expenses took a step up in 2022 when the company took on $400 million in debt to finance its youtheory acquisition. So far in 2023, interest expenses have increased by $11.2 million YoY, leading to a drag on EPS (Figure 10).   Figure 10 - Interest expenses have surged due to higher debt and interest rates (JWEL financial reports) Although long-term debt has been reduced to $300 million as of September 30, 2023, due to elevated interest rates, Jamieson may not see much relief in debt service charges in the coming quarters, as the weighted average interest rate on the credit facilities were 6.2% in 2023 compared to 3.2% in 2022. Furthermore, assuming the company directs future free cash flows to repurchase shares instead of paying down debt, long-term debt balances may stay elevated. Conclusion Jamieson Wellness remains a global leader in VMS products. JWEL's stock saw a strong rebound post its Q3 earnings report as the company delivered resilient financial performance and announced a large buyback program. Despite the sharp rally, Jamieson's stock still looks attractive compared to the sector and I maintain my buy rating.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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