Not good, but great.
Desjardins analyst Frédéric Tremblay says this is how Good Food Market (Good Food Market Stock Price, Charts, News, Analysts, Financials TSX:GOOD) is currently valued from an investment perspective: says.
On April 16th, FOOD announced its second quarter financial results. The company's net income was $1.39 million, and sales were $39.8 million, with sales down 5% year-on-year.
“The first half of 2024 demonstrated the efficient operating foundation we have built, enabling us to deliver adjusted EBITDA.” [earnings before interest, taxes, depreciation and amortization] We have grown over the past 12 months and are expected to reach a total of $9 million,” said CEO Jonathan Ferrari. “These results drove two key vectors of value creation: cash flow generation and deleveraging. This quarter marks the second consecutive quarter of positive adjusted free cash flow and the first in the past 12 months. We achieved adjusted free cash flow of over $7 million. Also, over the past nine months, our total net debt to adjusted EBITDA ratio has gone from 8x nine months ago to just over 2x today. By combining cash flow generation with increased leverage, Good Food is better able to manage its capital structure and consider different capital allocation options to generate growth and enhance shareholder value. You can stand your ground.”
Analysts summed up the quarter.
“Our second quarter results were characterized by significantly improved adjusted EBITDA as cost discipline contributed to improved profitability, cash flow and leverage,” he said. “Looking forward, given the challenging consumer spending environment, we are being somewhat cautious about the timing of a return to sales growth. Nevertheless, our adjusted EBITDA expectations will increase further. Management It's interesting that the group is willing to explore smaller M&A opportunities, but we think we need to be very cautious.”
Tremblay listed several reasons to be careful when it comes to food.
“Revenue growth remained slow in the second quarter as a decline in active customers offset higher revenue per customer,” he said. “That said, cost discipline resulted in a record gross margin of 43.0%. Adjusted EBITDA of $3.5 million exceeded expectations, marking the fifth consecutive quarter in positive territory. Active Customers While base increased in Q1, that momentum did not transfer to Q2 (-5.6% QoQ) In this context, Good Food remained disciplined with its marketing spend and unit economics. In our view, it may be difficult for the company to demonstrate a sustained growth trajectory in active customer numbers until the environment becomes more supportive of increased consumer spending and demand for instant meal kits. We are now modeling year-over-year growth in our active customer base for FY25 instead of FY24.”
As reported by the Globe and Mail, on April 18, the same analyst reiterated his “hold” rating but lowered his price target on the food product from $0.75 to $0.65.