Vital Farms Inc

VITL Details

Vital Farms Inc (NASDAQ: VITL) is engaged in providing pasture-raised eggs and pasture-raised butter to conventional and natural grocery stores as well as foodservice outlets in the US. The company is the second-largest egg brand in terms of retail dollar sales.

Q1FY21 Results Performance (For the Quarter Ended March 28, 2021)

• Rise in Revenue: Net revenue stood at $58.5 million, up 23% YoY driven by growth in the volume of its distributors and retail partners along with the benefits of distribution gains in new and existing customers.
• Adjusted EBITDA stood at $4.7 million versus $3.8 million in Q1FY20, primarily driven by expanded gross margin, and leverage over fixed operating costs, besides a rise in revenue
• Net Income increased to $3.5 million in Q1FY21 from $1.9 million in Q1FY20

Financial Snapshot (Source: Company Reports)

Recent Updates

• As per the release dated 20 July 2021, the company will announce its financial results for the second quarter ended 27 June 2021 on Tuesday, 10 August 2021 before the market opens.

Outlook

As per the management, the disruptions in the supply chain have been resolved and there is no concern relating to customers or consumers, including any issues from adverse macroeconomic factors. For FY21, management is confident to generate revenue in the ambit of $246-$253 million, up 15-18% over 2020. Further, Adjusted EBITDA is expected in the ambit of $7-$9 million. 

Key Risks

The company’s inability to launch new products may hurt its growth plans. VITL’s performance is highly dependent on the sales of pasture-raised shell eggs and any slowdown in these sales would negatively impact its financial condition.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

VITL has delivered 6-month and 9-month returns of ~-35.7% and ~-53.7%, respectively. The stock is trading lower than the average of the 52-week high price of $43.2999 and the 52-week low price of $16.36, which indicates a good opportunity for accumulation.

We have applied EV/Sales multiple based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a slight premium as compared to peer average EV/Sales multiple (NTM basis) considering its sustained focus on store growth across the retail channel and strong FY21 guidance.

Considering the aforementioned factors along with its healthy liquidity position as well as growth strategy, we give a “Speculative Buy” recommendation on the stock at the current market price of $16.45 per share, down by 0.48% on 5^th August 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.