Premium Brands Holdings Corp (PBH-T)

Disappointing. Squarely in consumer discretionary. Even though it's wholesaling more to grocery retailers, end-consumer is tight on cash right now. Solid, but you don't want to be here right now. 

EPS of 54c beat estimates of 52c; revenue of $1.46B was marginally better than consensus. EBITDA of $121M was 6% better. Sales forecast was affirmed. EPS did slip from 64c last year. Revenue rose 2.2%, with specialty foods up 4.1%. Speciality foods has recovered nicely from its 4%+ contraction in the prior quarter, and showed 1% organic growth this quarter. The quarter was good and will likely be a relief for investors. 
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It is starting another 5 year plan to bring their sales up to $10 billion. This time it wants 80% of growth to be organic which is better since there will be more within its control. For this to happen it will need to increase revenue by 9 1/2%, more than the increase needed before. Although traction has not yet started, it can raise or hold prices since all are branded products. It is a good buy for the long term.

PBH is up 40% from seven years ago, but up 145% from exactly eight years ago. It is up 9% this year, nine percentage points ahead of the TSX. None of these returns include dividends. It is up 60% since it was added to the 5i Balanced Portfolio. Now, these are not 'stellar' returns, but consensus calls for 20% growth next year, higher than its valuation multiple. EPS has tripled since 2015, and, considering its stable and growing cash flow, we remain comfortable with it. We show IGM with a five-year return of -5.7% and PBH with a five-year return of 26.7%. 
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Still owns shares in company, and has been buying more lately. Last two years has impacted bottom line with inflation. Great management team with excellent capital allocation skills. Very strong long term investment. Good time to buy at current share price. 

After its 35% run this year it is perhaps more vulnerable to profit taking if it misses earnings next week. But we do like the company and the positive momentum is encouraging. We would be fine holding it for the long term, but would keep position size in mind after its recent run up. 
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Debt is high, with a debt-to-equity ratio of 1.5 and a net debt/EBITDA of 6.1X, and profit margins are thin, but management has successfully used debt to inorganically grow the company, and this is demonstrated through its top-line sales growth. The recent move comes alongside its reiteration of guidance for the year as well as a bit of valuation re-rating - its forward earnings multiple has expanded from 13X in late 2022 to 23X currently.  

It has missed its last few earnings results, although, the price has continued to rise despite this. We feel that if its earnings are OK or better than expected in August, the stock could continue to climb as signs of peak interest rates and earnings growth appear.
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IT has lagged due to inflationary costs but pricing has caught up. It is noteworthy that 85% of its revenue growth will be organic in its five year growth plan. There are 18 projects planned , 11 of which have been started. It will source more prepaid food options. It is building a 500,000
square foot sandwich making facility in the U.S.