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Category: Stock Market and Covetrus
Date: 1 October 2019 Stock Price: $11.80 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Covetrus, a global animal-health technology and services company.
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About Covetrus
Covetrus is a global animal-health technology and services company dedicated to empowering veterinary practice partners to drive improved health and financial outcomes. We are bringing together products, services, and technology into a single platform that connects our customers to the solutions and insights they need to work best. Our passion for the well-being of animals and those who care for them drives us to advance the world of veterinary medicine. Covetrus is headquartered in Portland, Maine, with more than 5,500 employees, serving over 100,000 customers around the globe.
Overview of Covetrus' latest earnings report
- Net sales: $1.009 billion (up from $1.005 billion for the same quarter of the previous year
- Revenue increased by 0.39% over the last 12 months
- Cost of sales: $809 million (up from $822 million for the same quarter of the previous year)
- Cost of sales decreased by -1.58% over the last 12 months
- Net income: -$10 million (down from $29 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.09 (up from $0.40 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 112 million (down from 72 million for the same quarter of the previous year)
- Cash and cash equivalents: $55 million
- Cash and cash equivalents per share: $0.49
- Cash and cash equivalents makes up 4.16% of Covetrus' market capital
- Cash and cash equivalents makes up 1.31% of Covetrus' total assets
- Accounts receivable: $458 million
- Accounts receivable makes up 10.93% of Covetrus' total assets
- Inventories: $556 million
- Inventories makes up 13.26% of Covetrus' total assets
- Stockholders equity of Covetrus: $2.247 billion
- Stockholders equity per share: $20.06
- Covetrus is trading at 0.58 times its stockholders equity, which one doesn't see often as most firms tend to trade at between 2 and 4 times their stockholders equity per share
Covetrus' management commentary on the results and earnings guidance
PORTLAND, Maine , Aug. 13, 2019 (GLOBE NEWSWIRE) -- Covetrus (Nasdaq: CVET), a global leader in animal-health technology and services, today announced financial results for the second quarter of 2019, which ended June 30, 2019.
“We have made significant progress over the last six months in creating a new global platform to better support the evolving needs of our veterinary community and to unlock new health and financial outcomes,” said Benjamin Shaw, Covetrus president and CEO. “Our momentum in our technology platform is robust, and we are encouraged by the accelerating pace of engagement in these early innings of our transformation journey. While end-market factors and the timing of certain infrastructure investments are creating delays to our timeline, my conviction in our ability to drive accelerated growth remains unchanged due to our market opportunity and our differentiated global value proposition.”
2019 Guidance
Covetrus’ fiscal year 2019 financial guidance range is now as follows:
“While we are disappointed in the revision to our 2019 outlook, we remain encouraged by the increased demand for our technology platform, which remains our strategic long-term driver of accelerated net sales growth and margin expansion,” said Christine T. Komola, executive vice president and chief financial officer. “Longer-term, we are focused on driving additional efficiencies in our organization, executing against our stated value capture priorities, improving free cash flow and deleveraging the balance sheet.”
“We have made significant progress over the last six months in creating a new global platform to better support the evolving needs of our veterinary community and to unlock new health and financial outcomes,” said Benjamin Shaw, Covetrus president and CEO. “Our momentum in our technology platform is robust, and we are encouraged by the accelerating pace of engagement in these early innings of our transformation journey. While end-market factors and the timing of certain infrastructure investments are creating delays to our timeline, my conviction in our ability to drive accelerated growth remains unchanged due to our market opportunity and our differentiated global value proposition.”
2019 Guidance
Covetrus’ fiscal year 2019 financial guidance range is now as follows:
- Pro forma organic net sales growth, a non-GAAP financial metric, of low single-digits versus 3% to 5% previously to reflect changes in market growth in North America and Brexit-disruption in the U.K. Pro forma organic net sales growth includes Vets First Choice in both periods, excludes the impact of foreign exchange fluctuations, mergers and acquisitions and normalizes for net sales adjustments for manufacturer switches from direct to agency sales in the U.S. The previously announced customer loss in North America and loss of a manufacturer relationship in APAC is still expected to negatively impact organic growth by more than 2% in 2019.
- Enrollments on the Vets First Choice prescription management platform of more than 3,000 in North America, unchanged versus the prior outlook. We expect to end 2019 with more than 10,000 practices on our prescription management platform in North America.
- Pro forma adjusted EBITDA, a non-GAAP financial metric, of at least $200 million versus the range of $235 million to $250 million previously. We now expect to spend $40 million of the planned approximately $100 million in infrastructure investments in 2019, of which $10 million to $15 million are recurring expenses and now included in our presentation of adjusted EBITDA. The balance of the reduction is tied to the impact of certain end-market softness.
“While we are disappointed in the revision to our 2019 outlook, we remain encouraged by the increased demand for our technology platform, which remains our strategic long-term driver of accelerated net sales growth and margin expansion,” said Christine T. Komola, executive vice president and chief financial officer. “Longer-term, we are focused on driving additional efficiencies in our organization, executing against our stated value capture priorities, improving free cash flow and deleveraging the balance sheet.”
Covetrus (NASDAQ: CVET) stock price history
The image below shows the stock price history of Covetrus (NASDAQ:CVET) over the last 5 years. And it's not been a good time for Covetrus (NASDAQ:CVET). 5 years ago the stock was trading at around $42 and it is currently trading at $11.80 a stock. So since their listing in February 2019 the stock of Covetrus (NASDAQ: CVET) declined by -71.9% . The stock is also trading at closer to its 52 week low of $11.46 than it is to its 52 week high of $50 which to us is a clear indication that the short term sentiment and momentum towards Covetrus' stock is very negative.
Covetrus (NASDAQ: CVET) latest stock valuation
So what is Covetrus (NASDAQ: CVET) stock worth based on the release of their latest earnings report and their outlook provided? It is always hard to value a loss making firm, and our fallback position in most cases when a firm makes a loss or generates only small amounts of cash from operating activities is to use the company's stockholders equity per share. We therefore value Covetrus at $20.00 a stock. We therefore believe that the stock is undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $20. A good entry point into Covetrus would be at $18 or below. Since the stock is trading well below this price already we rate Covetrus as a buy.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $20. A good entry point into Covetrus would be at $18 or below. Since the stock is trading well below this price already we rate Covetrus as a buy.