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Category: Stock Market and Covetrus
Date: 13 November 2019 Stock Price: $12.26 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Covetrus, a global animal-health technology and services company serving over 100 000 customers
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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: $1.018 billion (up from $923 million for the same quarter of the previous year
- Revenue increased by 10.3% over the last 12 months
- Cost of sales: $821 million (up from $757 million for the same quarter of the previous year)
- Cost of sales decreased by 8.5% over the last 12 months
- Net loss: -$906 million (down from $16 million for the same quarter of the previous year)
- The massive loss is due to goodwill being written down to the value of $939 million
- If this goodwill impairment was not part of the results the group would have reported net earnings of $33 million
- The massive loss is due to goodwill being written down to the value of $939 million
- Diluted loss per share: -$8.09 (down from $0.22 for the0.294 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: $68 million
- Cash and cash equivalents per share: $0.61
- Cash and cash equivalents makes up 4.9% of Covetrus' market capital
- Cash and cash equivalents makes up 2.04% of Covetrus' total assets
- Accounts receivable: $466 million
- Accounts receivable makes up 10.93% of Covetrus' total assets
- Inventories: $556 million
- Inventories makes up 14% of Covetrus' total assets
- Stockholders equity of Covetrus: $1.329 billion
- Stockholders equity per share: $11.86
- Covetrus is trading at 1.03 times its stockholders equity per share which is outside the expected range of between 2 and 4 that most firms tend to trade at
- Cash generated from operations (for 9 months): $33 million
- Cash generated from operations per share (for 9 months): $0.294
Covetrus' management commentary on their 3rd quarter earnings report and guidance
PORTLAND, Maine, Nov. 12, 2019 (GLOBE NEWSWIRE) -- Covetrus (Nasdaq: CVET), a global leader in animal-health technology and services, today announced financial results for the third quarter of 2019, which ended September 30, 2019.
"Our team is unified in our belief in the Covetrus business model and the power of our integrated platform to drive measurable value for our customers, shareholders, employees and partners," said Benjamin Wolin, Covetrus acting president and CEO. "We have the assets, we have the relationships, we have the technology tools our customers need, and we are in a growing market. With a relentless focus on execution and the core drivers of our business, we will continue to innovate and grow."
"Our team is unified in our belief in the Covetrus business model and the power of our integrated platform to drive measurable value for our customers, shareholders, employees and partners," said Benjamin Wolin, Covetrus acting president and CEO. "We have the assets, we have the relationships, we have the technology tools our customers need, and we are in a growing market. With a relentless focus on execution and the core drivers of our business, we will continue to innovate and grow."
2019 Guidance
Covetrus’ fiscal year 2019 financial guidance range is as follows:
Covetrus’ fiscal year 2019 financial guidance range is as follows:
- Pro forma organic net sales growth, a non-GAAP financial metric, expected to be low single-digits and is unchanged from the company's prior outlook; and
- Pro forma adjusted EBITDA, a non-GAAP financial metric, expected to be in a range of $190 to $196 million versus the company's prior outlook of at least $200 million.
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 $12.26 a stock. So since their listing in February 2019 the stock of Covetrus (NASDAQ: CVET) declined by -70.8% . The stock is also trading at closer to its 52 week low of $8.16than 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.
Recent coverage of Covetrus
The extract below discusses Covetrus' slide from the MidCap index to the small caps index as obtained from TheStreet.com
BJ's Wholesale Club Holdings Inc. (NYSE: BJ) will replace Covetrus Inc. (NASD: CVET) in the S&P MidCap 400, and Covetrus will replace Assertio Therapeutics Inc. (NASD: ASRT) in the S&P SmallCap 600. Covetrus has a market capitalization that is more representative of the small-cap market space. Assertio Therapeutics is ranked near the bottom of the S&P SmallCap 600 and is no longer representative of the small-cap market space.
BJ's Wholesale Club Holdings Inc. (NYSE: BJ) will replace Covetrus Inc. (NASD: CVET) in the S&P MidCap 400, and Covetrus will replace Assertio Therapeutics Inc. (NASD: ASRT) in the S&P SmallCap 600. Covetrus has a market capitalization that is more representative of the small-cap market space. Assertio Therapeutics is ranked near the bottom of the S&P SmallCap 600 and is no longer representative of the small-cap market space.
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. However the loss reported during this quarter for Covetrus was due to its goodwill impairment. Excluding this impairment Covetrus would have made a profit of around $33 million. Using this as the basis for our valuation, our valuation model provides a target (full value) price for Covetrus at $18.70 a stock (down slightly from our 2nd quarter 2019 earnings report valuation of Covetrus).
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 $18.70. A good entry point into Covetrus would be at $16.80 or below. Since the stock is trading well below this price already we rate Covetrus as a buy.
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 $18.70. A good entry point into Covetrus would be at $16.80 or below. Since the stock is trading well below this price already we rate Covetrus as a buy.
Next earnings release of Covetrus
It is expected that Covetrus' 4th quarter and full fiscal 2019 earnings report in mid February 2020