DAVIDsTEA (DTEA) at 0.2x Rev, OWYN's buyout for 2.3x Rev M&A activity in the food and beverage industry is strong every year. But many food and beverage companies don't have tea in their brand portfolio, so they seek to diversify their portfolio by expanding into the tea business, given also that the tea market grows rapidly and its CAGR is about 6%, see below:
https://www.globenewswire.com/news-release/2025/01/15/3010490/32656/en/Tea-Market-to-Grow-Rapidly-Hitting-US-33-9-Billion-by-2032-at-a-5-9-CAGR-Transforming-Global-Beverage-Preferences-says-TMR.html#:~:text=%E2%80%93%2C%20Jan.,by%20the%20end%20of%202032.
But creating a tea business and building a tea brand and brand recognition from scratch is not easy, so the large names focus on inorganic growth by acquiring small tea companies with excellent tea blends and good reputation.
Importantly, DTEA's largest shareholder (Herschel Segal) who owns more than 40% is 95 y.o., according to the company's annual report, so he will sell the company sooner rather than later, which is another key tailwind, because the existing shareholders will receive a good premium. How much premium?
Well, OWYN is a privately-held beverage company that was recently acquired in cash by Simply Good Foods (SMPL) for 2.3 times its revenue, as clearly mentioned in the link below:
https://www.thesimplygoodfoodscompany.com/news-releases/news-release-details/simply-good-foods-company-acquire-only-what-you-need-owyn
OWYN's cash buyout for 2.3 times its revenue is one more recent deal in the beverage industry proving that DTEA at CAD$1.20 per share is incredibly cheap.
The reason is that DTEA's Enterprise Value at CAD$1.20 per share is only 0.2 times this fiscal year's revenue of about CAD$70 million, as explained in my previous posts.
As a reminder, DTEA has zero debt and its cash will be about CAD$16 million at the end of Q4, its strongest quarter.
On top of this, DTEA will grow its business in 2025 thanks to the 2 recently-opened new stores.
According also to the CEO's recent statements, DTEA will open new stores in 2025.
So there is no question that revenue in 2025 will exceed CAD$70 million.