Supremex Inc T.SXP

US acquisition

[HermannHaller]

This looks like another accretive deal for them in the envelope market. Recall back in early 2020 they bought another 'Royal Envelope' in Eastern Canada, and that I think was a big part of the profit expansion in the past couple of years. This looks cheap too, at only 0.5x revenue, the last deal was at 0.9x revenue. 

https://www.globenewswire.com/news-release/2022/11/01/2545245/0/en/Supremex-Announces-Strategic-Acquisition-in-the-United-States.html

[HermannHaller]

We should get an analyst update tomorrow. There is only one analyst covering the stock, Neil Lindsell at IA. Previously he had an EPS estimate of 84c for this year, and a target price of $8.50. For 2023 with this acquisition I think EPS could be close to $1. Would that take the target price to $10? Seems reasonable to me. If anyone has access to IA research, that would be appreciated.

[mrmoribund]

Among other things, this will strengthen the case for seeing Supremex as a true growth story. The analysts will love the acquisition. If Supremex is only a paper products company that caught some favourable covid-related market winds in its sail then it probably should be priced where it is. But if it's a legitimate growth story it should (and ultimately will) be priced much higher.

[HermannHaller]

52-week high and its still only around 5-6x PE. Congrats to all those who have stuck around, much more to come.