2017 IPO Review: Roots Corporation

We continue our 2017 IPO review with Roots Corporation (TSX:ROOT). The stock stuttered onto the market. How is it doing now?

| More on:

This year was a good one for one iconic Canadian clothing retailer: Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS). But there was another prominent retailer that stumbled out of the IPO gate: Roots Corporation (TSX:ROOT). Let’s take a look at Roots’ rocky ride this fall.

The IPO

Roots went public on October 25, six months after Canada Goose had its own successful launch. The stock was priced at $12 per share and quickly plunged over 16.67% on its first trading day. Why did it fare so poorly? Well, traditional retailers have struggled in recent years to attract and retain customers. Many have been pushed out of the market or have been marginalized by online retailers such as Amazon.com, Inc. (NASDAQ:AMZN). Fool contributor Joey Frenette talked about these issues in his article the day after the Roots launch.

How the stock looks now

The stock reported third-quarter earnings in early December, giving investors their first results to analyze since the IPO. Revenue came in at $89.69 million, a year-over-year increase of 12.9%. In the not-so-good category, net income was $4.98 million, which was off the previous year’s numbers by 15.65%. Net profit sits at 5.55%, also off the pace by 25.4%.  However, overall margins were up, along with EBITDA. You can read more earnings analysis by Fool contributor Will Ashworth here.

The company hasn’t announced much news beyond the earnings results since its IPO. The only semi-major announcement was the launch of a new store, which I discussed last month.

In terms of stock price, Roots hit an overall low of $8.55 this fall and a high of $11.55.  The company has never equalled the IPO price since its October launch. Although it does currently trade in the $11 range, it’s been up and down over the last two months. Its trailing P/E ratio is high at 33.14, but it’s far better than some of its competitors, such as Canada Goose.

Investor takeaway

Roots didn’t get the start it wanted, but it’s more or less stabilized within a few dollars. I’m looking for more earnings results in 2018 before I decide whether or not I like this stock.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon.

More on Investing

investment research
Dividend Stocks

Best Stock to Buy Right Now: TD Bank vs Manulife Financial?

TD and Manulife can both be interesting stock picks for today, depending on your investment style.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These stocks are out of favour but could deliver nice returns over the coming years.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »