Spring Sale
Jamieson Wellness Inc. (TSX:JWEL), one of the world’s leading manufacturers and marketers of sports nutrition products and specialty supplements, announced its fiscal 2017 fourth-quarter and full-year earnings results after the market closed on Thursday, and its stock responded by falling 0.77% in Friday’s trading session. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today.
Breaking down the earnings report
Here’s a quick breakdown of 10 of the most notable statistics from Jamieson’s three-month period ended December 31, 2017, compared with the same period in 2016:
| Metric | Q4 2017 | Q4 2016 | Change |
| Jamieson Brands revenues | $65.55 million | $55.19 million | 18.8% |
| Strategic Partners and Eliminations revenues | $18.77 million | $10.51 million | 78.7% |
| Total revenues | $84.32 million | $65.70 million | 28.3% |
| Gross profit | $30.90 million | $23.70 million | 30.3% |
| Gross margin | 36.6% | 36.1% | +50 basis points |
| Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) | $18.85 million | $14.73 million | 28.0% |
| Adjusted EBITDA margin | 22.4% | 22.4% | Unchanged |
| Adjusted net income | $9.75 million | $5.10 million | 91.1% |
| Adjusted diluted earnings per share (EPS) | $0.25 | $0.13 | 92.3% |
| Cash flows from operating activities | $17.55 million | $12.64 million | 38.8% |
And here’s a quick breakdown of 10 notable statistics from Jamieson’s 12-month period ended December 31, 2017, compared with the same period in 2016:
| Metric | Fiscal 2017 | Fiscal 2016 | Change |
| Jamieson Brands revenues | $237.00 million | $192.50 million | 23.1% |
| Strategic Partners and Eliminations revenues | $63.62 million | $55.84 million | 13.9% |
| Total revenues | $300.62 million | $248.33 million | 21.1% |
| Gross profit | $104.85 million | $80.81 million | 29.7% |
| Gross margin | 34.9% | 32.5% | +240 basis points |
| Adjusted EBITDA | $61.48 million | $46.79 million | 31.4% |
| Adjusted EBITDA margin | 20.5% | 18.8% | +170 basis points |
| Adjusted net income | $27.58 million | $10.91 million | 152.8% |
| Adjusted diluted EPS | $0.70 | $0.28 | 150.0% |
| Total assets | $512.56 million | $405.18 million | 26.5% |
Outlook on the year ahead
In the press release, Jamieson provided its outlook on fiscal 2018, calling for the following results:
- Revenue in the range of $325-335 million, representing growth of 8-12% from 2017
- Adjusted EBITDA in the range of $67-69 million, representing growth of 9-13% from 2017
- Adjusted diluted EPS in the range of $0.83-0.87, representing growth of 18-25% from 2017
What should you do with the stock now?
The fourth quarter capped off a phenomenal year for Jamieson, and its outlook calls for very strong growth in 2018, so I think its stock should have responded by rallying on Friday; that being said, I would buy the stock today for one fundamental reason in particular: it’s undervalued based on its growth. Jamieson’s stock currently trades at 29.4 times fiscal 2017’s adjusted diluted EPS of $0.70, which seems fair, but it trades at just 24.2 times the median of its adjusted diluted EPS outlook of $0.83-0.87 for fiscal 2018, which is inexpensive given its current double-digit percentage earnings-growth rate and its long-term growth potential.
It’s also worth noting that Jamieson pays a quarterly dividend of $0.08 per share, representing $0.32 per share on an annualized basis, which gives it a respectable 1.6% yield. Any dividend is great for a high-growth stock like Jamieson, and the best way to utilize it is to make sure your investment account is set to have all dividends reinvested (with a DRIP program).
With all of the information provided above in mind, I think all Foolish investors should consider initiating small positions in Jamieson Wellness today with the intention of adding to those positions on any significant pullback in the future.
