Ebos Group (EBO) is a company that operates broadly within the healthcare industry. That is to say that they are heavily integrated within the healthcare system, but also have front facing B2C aspects like pharmacies, vitamins (Red Seal), and pet supplies (Animates, Vitapet, etc.). They have an exceptional history of successfully managing inorganic growth through acquisitions, and steadily growing profits.
I’m just doing a quick and dirty analysis of the current share price because I’m somewhat familiar with the company, and just want to see if there’s any value to be had in the current share price. Also, I’m quite tired, so please bear with me.
The current market capitalization for EBO is $3,574.724m. Recent first half NPAT is about $81.7m (I’ll use the lower, statutory NPAT over the normalized, Underlying NPAT). Lets double that to use it as an annual NPAT (~$164m). Now lets take $20m from that to represent the increase in NPAT from the $30m (an additional ~16%) improved pharmacy revenue from an increase in the sale of discretionary items. Actually, rather than try to work out an increase in discretionary sales across every aspect of the business, lets just take a pessimistic 15% from the profits for the oncoming recession – it’s all a guess anyway, right? Lets say forward NPAT will be $130m.
While the coming recession may cause NPAT to take a hit, Ebos recently announced that this last quarter has been very successful with demand on healthcare. I chose a pessimistic approach, because there’s no need to look at it any other way with risk ahead vs relatively safe harbour of money in the bank.
Net Debt is $392m (a decrease on last year). That’s a lot of money, but they seem to be handling it (they are going through refinancing soon), and interest rates are looking increasingly favourable.
With earnings of $164m, this gives rise to a MC/NPAT ratio of just 22. What a bargain for a company with double digit percentage growth. The numbers still look exciting if we add debt to the MC to represent a CR if they cant refinance, giving a ratio of ~24.5, but that probably wont happen. If we consider NPAT more pessimistically at $130m, this gives a ratio of about 27.
All of the above look quite attractive for a company with double digit growth in its history. Even using the pessimistic values, that’s still quite a favourable ratio, which is likely to drop in 2 years to about 20, then further in future years.
In my opinion, this stock is not only a safe harbour as a company that could benefit from increased healthcare demands and not suffer as much as others through a recession, but is also currently offering some good value.
That said, I do recommend you do your own analysis because as I mentioned earlier, I’m quite tired while doing this research.