Investor sentiment towards consumer stocks (especially online disrupters) is presently fragile at best, with AO, THG & ASOS.com all suffering painful falls from their 52-week highs.
Nonetheless from a macro perspective, working families are still ‘relatively’ flush with cash - built up during the lockdowns & providing significant pentup demand. Which when added to easing supply chains, inventory rebuild, strong corporate earnings & capex and government infrastructure spend – should underpin robust economic growth well into next year.
Ok, but where to invest? Well personally, I’d stick with the highest quality names. Those with durable & fast growing business models, as such affordable cosmetics & hair/skincare brand Revolution Beauty.
Today the company reported impressive H1 results with LFL sales & EBITDA both up 39% to £78.6m & £5.1m respectively.
Plus following “a strong Halloween & a promising start to Xmas”, #REVB is on track to hit FY22 (y/e Feb) expectations of £22.5m in adjusted EBITDA on sales of £198m. Driven by the US (+90% in H1) and Haircare (+203%), alongside continued online (DTC) & store expansion (Boots UK & Ultrabeauty), where #REVB is now the top performing brand in the Target’s cosmetics category.
However this is just the start. After raising £300m at 160p/share in July (Sept'21 net cash of £17.6m), I believe the group can more than double revenues over the next 5 years. Which on a 15x EV/EBITDA multiple & assuming 12.5% margins, would generate a hypothetical £750m valuation, or 240p/share.
In comparison, Zeus Capital have a DCF derived figure of 201p/share. Albeit CEO Adam Minto’s more ambitious goal is to exceed £1bn by FY27- that could theoretically produce a 10 fold shareholder return.
Interesting times.