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Simply Better Brands has a 135 per cent upside, says Clarus

Clarus Securities analyst Noel Atkinson has reviewed the latest quarterly numbers from Simply Better Brands (Simply Better Brands Stock Quote, Charts, News, Analysts, Financials TSXV:SBBC) and in a Thursday report to clients he reiterated a “Speculative Buy” rating on the stock, saying the Q1 was a strong start to the year from the nutrition and wellness CPG company.

Vancouver-based Simply Better Brands, which has brands including CBD lineup PureKana and energy bar TRUBAR and sells both direct to consumer and through regional retail across the US and Canada, released its first quarter 2023 financials on Tuesday. SBB delivered a 104 per cent year-over-year increase in revenue to $24.6 million, also representing a seven per cent sequential improvement. (All figures in US dollars except where noted otherwise.)

The TRUBAR protein bar line saw revenues climb 308 per cent year-over-year and 200 per cent quarter-on-quarter to $10.2 million, with a national promotion at Costco helping to drive sales.

PureKana sales were up 34 per cent to $12.5 million, with almost all of those sales through e-commerce, direct-to-consumer business.

In its quarterly commentary, management gave 2023 guidance of $80 million in revenue and $3-4 million in adjusted EBITDA.

“As our strong Q1 2023 financial and commercial results illustrate, we are positioned for continued revenue growth, profit improvement, and debt reduction in 2023. Our strategic priorities remain to lead consumer-centric innovation and relentlessly acquire customers to these emerging brands by driving category and channel expansion,” said CEO Kathy Casey in a press release.

Atkinson said the $24.6 million Q1 topline was basically in line with both management’s guidance of about $25 million and the analyst’s forecast at $24.8 million. Atkinson said SBB’s adjusted EBITDA at $0.8 million was a “significant beat” of his $0.1 million forecast.

Atkinson said there are no direct comparables to Simply Better Brands in that the company has a large CBD-based consumer product (he said PureKana appears to be now the #1 CBD e-commerce company in the US) as well as a range of successful non-CBD-related health and wellness products. 

On a sum-of-the-parts valuation, Atkinson maintained a one-year target price of C$1.00, which at press time represented a projected return of 135 per cent.

“We continue to focus heavily on the TRU product line given the market opportunity (perhaps US$200-250 million in annual revenue over time) and the roster of high-value exits of successful protein bar-led nutrition CPG brands over the past several years (typically over 3x trailing 12-month revenues). The TRU brand is launching protein powder SKUs later this year, which should support revenue growth in 2024,” Atkinson wrote.

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