"To receive her full potential earn-out, Allen will need to lead the business to notch $25 million in sales in the current financial year with earnings above $5 million, and lift that to $30 million revenue and $6.5 million in earnings in FY23."
At the risk of speaking too soon, it looks like 10c, a new market cap of $38m post-dilution (384m SOI), might be the floor for the share price.
That's a multiple of 6.6x normalised EBITDA of ~$5.7 million pre-synergies (and a multiple of 5.8x on $6.5m synergy-adjusted EBITDA).
So, I understand the concerns here around whether earnings will come through as hoped, but there is a margin of safety at those levels in my opinion.
It will probably take a quarter or two for HLF to prove to the market that these earnings are growing and not declining for the market to get around this. Those who enter now do so with higher risk, but with higher potential reward.
Certainly not a slam dunk investment proposition here, but very intriguing. Particularly when you look out a year or two to turnover of $100m+.
I still consider HLF as a stock with a compelling risk/reward, although I must admit that this was a left-field acquisition for me.
HLF Price at posting:
10.0¢ Sentiment: Buy Disclosure: Held
