Revolutionary Beauty (REVB ). A super durable, high growth stock
Despite elevated S&P500 volatility, soaring inflation, central bank tightening & deteriorating consumer confidence, there are a few bright spots in the world economy.
Not least the fact that people still want to enjoy themselves, as evidenced by the rebound in overseas holidays, pandemic delayed celebrations and socializing.
Equally, there has been a noticeable pick up in the number of employees returning to the office. Meaning the global mass market, cosmetics industry (ex China lockdowns) is generally negotiating these unprecedented conditions pretty well.
As demonstrated again by today’s strong & “in line” FY22 (y/e Feb) trading update (H2 revs up +44% vs H1 +39%) from Revolutionary Beauty. Alongside robust performances from Warpaint (Re US & UK), L'Oreal, Estée Lauder and P&G’s/Unilever's personal products divisions.
So what did the numbers say?
Well clearly the enduring appeal of #REVB’s brand, omni-channel distribution model (71% of sales from stores), DTC proposition (29%) & international expansion strategy (re Boots & Walgreens) is hitting the right note.
Here FY22 EBITDA jumped 73% YoY to £22m on sales up 42% to £194m driven by a “record Q4”, increased store traffic (US +27%, UK +85% & ROW +79%), digital (re enabling rapid product innovation & test/learn capability) and economies of scale.
Elsewhere, house broker Zeus are forecasting Feb’22 net debt of £5m - reversing to a net cash position of £18.1m 12 months’ later, as profits further rise (FY’23 sales £236.5m, £31m EBITDA & 4.3p EPS) & working capital naturally unwinds (re debtors.
Finally wrt valuation, Zeus have a 194p price target offering 66% potential upside vs last night’s close. At 116.5p, the stock trades on CY EV/EBITDA & PE multiples of 11.2x & 27.2x respectively - falling to 9x & 21x next.