This morning’s “strong” & “in line” Xmas trading update from REVOLUTION BEAUTY (REVB) makes a mockery of the recent shareprice falls.
Here the popularity of its ‘quality yet affordable cosmetics & hair/skincare’ brands soared over the festive period. Reporting a 41% YoY jump in sales between Nov-Dec’21, despite the challenging consumer environment, partly caused by Omicron.
Indeed just think what the company would have achieved without having to deal with new lockdowns across core geographies such as Europe & UK.
Meaning there’s still 'plenty of gas left in the re-opening tank' (eg return to offices, partying, etc), as REVB continues to win market share from established industry names.
Boosted by ongoing expansion at Walgreens (2,800 stores), Boots & Target, alongside the launch of its new Haircare category. Whilst also selling >100,000 Advent Calendars via its own Direct to Consumer (DTC +50% in Dec) channel (ie RB.com).
Plus the quality of these retail endorsements, should provide investors with great reassurance that REVB's brands are 'hitting the right notes' with consumers. Not just in the UK/US, but also worldwide.
Sure the economic backdrop remains difficult to predict, yet equally the Board have sufficient visibility to maintain existing guidance. With house Zeus Capital forecasting adjusted EBITDA of £22.5m on revenues up 44% to £197.9m for the y/e Feb’22 – climbing to £30.5m & £236.5 respectively for FY23.
Hence to me, the stock at 97.4p looks remarkably undervalued. Trading on an undemanding FY’23 EV/EBITDA multiple of 9.2x vs >18x for the broader cosmetics sector. I’m not the only one either who thinks so, with Zeus Capital reiterating its DCF valuation of £622.6m – equivalent to 200p/share.
CEO Adam Minto adding: "As we look forward, our growth in our DTC business coupled with our successful retail expansion into the UK & US provides strong momentum for the business. We look forward to updating the market with our FY22 results later in the year."