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DAVIDsTEA Inc V.DTEA

Alternate Symbol(s):  DTEAF

DAVIDsTEA Inc. is a Canada-based tea merchant that offers a specialty branded selection of loose-leaf teas, pre-packaged teas, tea sachets, tea-related accessories and gifts. The Company provides its products through its e-commerce platform at www.davidstea.com and the Amazon Marketplace, its wholesale customers, which include over 4,000 grocery stores and pharmacies in Canada and 170 grocery stores in the United States, as well as 18 Company-owned stores across Canada. It offers primarily proprietary tea blends, as well as traditional single-origin teas and herbs. Its segments include Canada and the U.S. It provides various types of tea, including herbal tea, green, black, white, matcha, rooibos, oolong, Pu'erh and mate. Its tea-related accessories include teapots, teacups, large cups and cups Nordic, travel cups and cups, infusers and other accessories. It offers voted back teas, cold brew teas, iced teas, mocktail teas, tea for kids, garden to cup teas and organic teas.


TSXV:DTEA - Post by User

Post by stockfyon Dec 22, 2024 4:49am
60 Views
Post# 36374039

DAVIDsTEA (DTEA): Solid Profitability, Negative EV in Q4

DAVIDsTEA (DTEA): Solid Profitability, Negative EV in Q4 Debt-free DTEA will announce solid profitability in Q4 with strong operating cash flow and free cash flow, so its cash is expected to reach or even exceed C$15 million at the end of Q4. Here is why:

Q4 revenue usually almost double compared to Q3, so Q4 revenue will be about C$27 million.

Gross profit margin in Q4 will be at least 40% (a very conservative estimate because it was 51% in Q3) and SG&A expenses will be about C$7 million, same like Q3:

"Adjusting SG&A for non-recurring items, these expenses would have amounted to $7.1 million in Q3 2024, an improvement of $1.0 million or 12.6% over the prior year quarter."


As a result, net income in Q4 2024 will be about C$4 million, operating cash flow will be about C$10 million, and free cash flow will be about C$7 million, so cash will reach C$15 million at the end of Q4.

Debt will remain zero.

Market cap at C$0.50 per share is only C$13.5 million.

Therefore, DTEA's Enterprise Value at C$0.50 per share will be NEGATIVE in Q4 2024.

In other words, DTEA at C$0.50 is dirt-cheap.



Given also that annual revenue in 2024 will exceed C$65 million, its Enterprise Value should be at least 0.5 times its Revenue or at least C$33 million. 

So DTEA should be at about C$2 per share at the end of Q4, which is still a very low valuation, because most other beverage stocks trade from 1 times to 5 times their revenue.





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