Simply Better Brands is good for a double, says Clarus

Consumer packaged goods (CPG) company Simply Better Brands Corp (Simply Better Brands Stock Quote, Charts, News, Analysts, Financials TSXV:SBBC) received a coverage initiation from Clarus Securities on Tuesday, with analyst Noel Atkinson saying a strong management team and solid lineup of products has driven sales through the roof for the company. Atkinson started SBBC off with a “Speculative Buy” rating and $1.00 target price, good for a projected one-year return at the time of publication of 100 per cent.

Vancouver-based Simply Better Brands started out as a spinoff from hemp products company HeavenlyRX, which spun out its 50.1 per cent stake in CBD brand PureKana into a public listing in late 2020 and then changed its name to Simply Better Brands in April, 2021, to signal the move from a CBD and plant-based wellness company to a global health, wellness and lifestyle business.

The company, which sells both to retail and direct-to-consumer, has acquired and developed a number of CPG product lines to join PureKana, including 82.5 per cent owned No BS Skincare, 100 per cent owned nutrition bar brand TRUBAR and 100 per cent owned supplements and CBD topical products brand BRN Group.

Atkinson said the 2020-2022 period saw SBBC get most of its revenue growth from PureKana, which is currently one of the top ten CBD product companies in the US with about $50 million in net 2022 revenues, up from $13.8 million in 2021.

Meanwhile, the company acquired TRUBAR in August, 2021, and has pumped up sales for the line of protein and snack bars, going from about $1 million in yearly revenue to now over $10 million in 2022. Moreover, Simply Better has a national US distribution in Costco starting in April, 2023. (All figures in US dollars except where noted otherwise.)

Investors can expect TRUBAR revenue alone to more than double in 2023 to $25 million, according to Atkinson.

“Simply Better Brands (SBBC) ticks the boxes for an attractive small-cap CPG opportunity. The management team, led by CEO Kathy Casey, is highly experienced in both direct-to-consumer sales and wholesaling to large regional and national retailers. SBBC achieved a massive (over 4x) Y/o/Y revenue increase in 2022, driven almost entirely through organic growth, and we expect +25 per cent revenue growth in 2023,” Atkinson wrote.

The full picture has Atkinson forecasting $82.2 million in 2023 revenue compared to $65.7 million in 2022 and moving to $92.3 million in 2024. On adjusted EBITDA, the analyst is forecasting $3.1 million in 2023 and moving to $5.7 million in 2024.

“SBBC shares trade at valuation multiples that are substantially below peer group averages. Investors today effectively get SBBC’s PureKana CBD/supplement product business as a free call option, which we believe could potentially become the Company’s most valuable product line in the event that Congress or the U.S. FDA formalize rules on use of CBD as a food ingredient or dietary supplement,” Atkinson wrote.