Neighbourly Pharmacy Inc (NBLY-T)

The small pharmacy market in Canada is fragmented. Despite record results, growth by acquisition stocks are out of favour now because of higher interest rate concerns over too much debt. However they can easily cover their interest payments. Since their IPO a couple of years ago revenues and profits have more than doubled. It has a great runway for growth with improving margins and free cash flow and he is adding to his position. It is at an all time low valuation at 9X EBITDA.

NBLY has not been a public company for very long (IPO'd in mid-2021), but its growth rates are strong, and while it is not yet profitable, it is on the cusp of becoming profitable. Its forward P/E is now fairly high at 31.3X, but its price to book is 1.2X and its forward sales multiple is cheap at 0.8X. It has a ~5.7% free cash flow yield and its balance sheet is strong. With a net profit margin of ~(2%), if sales growth continues at a fast pace and it becomes profitable, we believe that its strong fundamental base can begin to be appreciated by investors. We do not like the negative momentum recently, but we believe it has a lot to offer and it is now nearing its book value. In a rising interest rate environment, unprofitable names are still not investors' number one preference, but we expect NBLY's high growth rates to be a tailwind over the long-term. 
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Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. There is no news that would change fundamentals. It is trading at 48x earnings, so it is expensive and the market is not liking high valuation names right now. Would not buy on the negative momentum. Wait for confirmation of an uptrend before considering. Unlock Premium - Try 5i Free

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The revenues were short of estimates but the additional IPO cost is not surprising. New pharmacies are contributing to 55% revenue gains. The stock remains above IPO prices. Unlock Premium - Try 5i Free