Is it a good time to invest in Goodfood?

Marc Challande
3
minute read

Goodfood Market (FOOD.TO), a leading online grocery company in Canada, is currently down almost 90% Year-over-Year and lost its brightness from the Covid times. The company suffered from the economy’s reopening and cooled investors off. If the sector doesn’t seem attractive at first glance, itis still growing. Despite a decrease in revenue, the company improved in other key industries, which makes the company enjoyable.

 

 

Goodfood Market Overview

 

Goodfood Market is an online grocery company that delivers fresh meals and grocery products in Canada. The company offers ready-to-eatproducts, which include bakery, dessert, meat and seafood, drinks, pantry, produce, snacks, dairy, frozen, and kitchen essentials. It also offers Yumm, avalue meal kit for cost-focused customers.Founded in 2016, the company is involved in 10 Canadian provinces and claims 298,000 subscribers. Goodfood ownsbetter arguments than its competitors as it takes between 60 to 120 for traditional grocery when it only takes 30 minutes for Goofdood on-demand. Even crazier, the 1 generation of online grocery would take between 120minutes to 2 days. The company claims an average order value of $65+, in whichit makes a Gross margin of 25%-30%, an EBITDA margin of 10%-15%, and hasSelling, General and Administratives Expenses (SG&A) of less than 15%.

Goodfood Market will launch its Project Blue Ocean garnering3 pillars to return to profitability and growth (sharpening its brand’s value proposition, a better attracting, engaging with, and pleasing its customers, and aligning its operating structure and network to its vision). This project will positively impact the company’s EBITDA which will drive an additional yearly ­$25M .

 

Management Overview

 

Jonathan Ferrari, a born and raised Montrealer, is theCo-Founder and CEO of Goodfood. After graduating with honors from McGillUniversity, he joined RBC’s investment banking team in his hometown in 2010 and, in 2013, co-founded MTL Capital, LLC, a privately held entrepreneurial investment firm. In 2017, Jonathan was named one of Canada’s Top 40 Under 40.

A Montreal native from a long line of entrepreneurs, NeilCuggy is President and COO of Goodfood. Before this, he co-founded and ledMTL Capital LLC, a privately held entrepreneurial investment firm, and, from2010 to 2012, worked in the Investment Banking division of RBC Capital Markets.He graduated with first-class honors with distinction from McGill University, receiving a Bachelor of Commerce degree in Investment Management.

 

Financials

 

On July 1, Goodfood Market reported its 3quarter of 2022. On the negative side:

  • Net Sales of $67 million compared to $73 million in Q2-2022 and $108 million     in Q3-2021;
  • Net loss of $21 million, stable relative to the Q2-2022 net loss of $21     million and higher than the Q3-2021 net loss of $2 million

·       The gross margin increased to 26.2%, a 2.2% improvement compared to Q2-2022 and lower than Q3-2021 gross margin of 35.0%

Goodfood improved on many other vital data and continues its progress:

  • Sequentially improving quarterly profitability indicators: improving gross margin and     decreasing selling, general and administrative expenses driving lower     Adjusted EBITDA  loss of $10.6m in Q3-2022     compared to a loss of $13.6m in Q2-2022 and $17.7m in
        Q4-2021, and Adjusted EBITDA of $1.3m in Q3-2021
  • Growing on-demand Active Customers : 41% quarter-over-quarter growth reaching 38,000 households in Toronto, Montreal, and Ottawa at the     end of Q3-2022, translating into nearly $7 million in on-demand sales     before credits and incentives

 

 

Share Movement/Structure

 

As of June 4, there were 75M shares outstanding, and the board of directors held 40%.

Goodfood Market’s stock price is currently worth $1.18 for a$88M market cap. The stock price enjoyed a double-digit 52-week high of $10.8and is now close to its 52-week low of $1.15. The stock is currently bearish on many data, starting with its Moving Averages. Its Simple MA (50) is worth $1.56,  while its Simple MA (200) is worth $3.36. ItsRelative Stress Indexes show the stock is strongly oversold, with its RSI at 23and its RSI-based MA worth 30 (oversold is considered with any data equal to 30and under). Its technical also indicate 14 sells, eight hold, and four buy signals.

About its performance, investors witnessed a continuous downtrend over the last year with an 87% loss. On the positive side, analysts declare the stock as a buy with a $1.87 target.

 

 

Bottom Line

 

If the sector doesn’t seem hot anymore, it is still growing, and so does Goodfood Market (FOOD.TO). Besides, the company saw its revenue growth slowing; it improved vital data such as the gross margin and EBITDA. The company intends to continue to create long-term shareholder value by focusing and executing on three key value drivers by growing its orders and ActiveCustomer base supported by rapid on-demand delivery and an expanding grocery and meal solutions product portfolio, expanding the reach and density of its on-demand grocery and meal solutions fulfillment network, improving progressively its Net Loss and Adjusted EBITDA  as a percentage ofNet Sales through Project Blue Ocean: building an optimized cost structure, benefiting from the operating leverage Net Sales growth provides as well as through improved efficiencies and processes, to set up Goodfood for its next phase of growth.