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Costco takes TRUBAR national, Clarus says SBBC stock undervalued

TRUBAR, the flagship product from Simply Better Brands (Simply Better Brands Stock Quote, Chart, News, Analysts, Financials TSXV:SBBC) is convincing Costco and it should be convincing investors too, says Clarus Securities analyst Noel Atkinson.

In a research update to clients June 21, Atkinson maintained his “Outperform” rating and price target of $1.50 on SBBC.

The analyst noted that Costo, which is the largest buyer of TRUBAR, has expanded its reach, calling the development a “huge vote of confidence”.

“SBBC announced this morning that it is shipping a new 12-pack variety box SKU (Cookie Dough and PB&J flavors) to all 611 Costco USA stores,” Atkinson noted. “Our channel checks earlier this week revealed this new SKU shipping into Costcos in the Northeast USA as early as today. All 8 Costco USA buying regions should receive the new product over the coming weeks. Huge vote of confidence from TRUBAR’s #1 customer. We estimate Costco accounted for about US$20MM of TRUBAR’s 2023 revenues with regular listings in well under half of the Costco USA stores plus the seasonal spring national listing with an in-store coupon. Obviously, Costco was happy enough with TRUBAR’s performance to roll TRUBAR out nationwide on a regular basis. We estimate that Costco USA could now grow to US$30MM+/year of revenues for TRUBAR.”

The analyst thinks SBBC will post Adjusted EBITDA of $700,000 on revenue of $47.9-million in fiscal 2024. He expect those numbers will improve to Adjusted EBITDA of $4.8-million on a topline of $75.9-million in fiscal 2025.

“Our valuation model is 100% based on TRUBAR (target multiple of 1.75x EV/2025e TRUBAR sales). Our blue sky target of ~C$4.00/share is based on TRUBAR reaching US $100MM/year revenue runrate by early 2026e and a subsequent strategic investment or M&A exit at a value of US$300MM or more (3x revenue run-rate),” Atkinson concluded.

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Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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