Towards a more stable growth

It is interesting to remember that RBL's main problem was not so much to grow its business, but to better control its margins.

Q1 21 results confirmed that the company has now a much better control of its margins, thanks to 3 elements :
- strong growth of its gross margin (+ 530 bp yoy and + 210 bp qoq) thanks to 3 elements (less promotion, better product mix and more localised production), like the previous quarter,
- good control of its operating expenses, which decreased vs the previous quarter, while there was a strong growth of their business qoq,
- good control of its paid acquisition of customers (more or less in line with the growth of their business).

Going forward, there is a good sense that the company should keep its margin at least at existing level. Promotion and paid acquisitions are expected to increase, but operating expenses are expected to remain under control.

So RBL has now reached a decent level of EBITDA margin (17.4 % for Q1 21). Which is able to translate into a high level of cash generation, as the company requires a low level of invested capital (ex. negative working capital).

Difficult to think that the stock can't go higher given its high free cash flow yield of 8.1 %e (based on Q1 annualised) and its top line growth driven by the e-commerce sector.
The growth potential of the company continues to be large based on its total addressable market and the potential margin increase.

Once again, do your own reasearch and focus also on key risks, like their ability to get more repeat customers.