Bubs Australia Ltd (ASX: BUB) has reported its FY19 result, is the share price a buy?
Bubs was founded in 2006 by Kristy Carr and was listed on the ASX in January 2017. Its infant formula is based on goat milk and it also sells organic baby food. Bubs recently acquired NuLac Foods, Australia’s largest producer of goat milk products, it also guarantees exclusive supply of local goat milk from Australia’s largest herd of milking goats.
Bubs’ Soaring FY19 Result
The (originally) goat infant formula company reported that revenue grew by 154% to $46.8 million with domestic revenue growth of 153% and China revenue growth of 209%.
Not only did revenue rise strongly but its profit margins also grew significantly. Bubs reported that its group gross margin increased to 21% from 14% at FY18. Bubs products gross margin increased to 35% from 20% in FY18.
‘Normalised’ EBITDA (click here to learn what EBITDA means) grew by 1% to a loss of $5.9 million reflecting a significant increase in marketing and staff expenses in anticipation of the rapid growth the company is achieving. Statutory EBITDA improved 48% to a loss of $34 million. The loss largely reflects a $20.4 million non-cash expense for the equity linked transaction with Chemist Warehouse.
Perhaps one of the most important elements of FY19 for Bubs was that it achieved positive operating cashflow in the fourth quarter.
Bubs revealed that its statutory loss improved to $35.5 million from a net loss of $64.6 million in the prior year.
Bubs Management Comments
Bubs Founder and CEO Kristy Carr said: “Throughout the year we have continued to focus on pursuing our four pillar growth strategy together with our investments in supply chain and capabilities, investment in building Bubs brand, and the formation of new key channel partnerships.”
Is The Bubs Share Price A Buy?
Bubs has performed excellently during FY19 in terms of both its share price, operations and business dealings. It could be following in the early footsteps of its larger infant formula peers.
However, we must always pay attention to the price and value that we are buying. With Bubs being so early in its journey, it’s hard to say what the right price is. So I’d be happy enough to buy a small amount for my own portfolio and go along for the journey and buy more if it continues to progress well.
Other growth shares to keep on top of are the exciting businesses in the free report below.
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