Aspiring pill-packer Probiotec Ltd [ASX:PBP] share price is up 7.18% today, rising on the back of upgraded guidance from management.
More importantly, it’s hard proof that Probiotec’s recent (November) acquisition of Multipack-LJM is already paying off. With the $52.5 million takeover adding some serious substance to the small-cap’s topline figures.
And, looking ahead, management believe the outlook for FY22 is looking even better.
So, let’s take a closer look at these revised guidance figures…
Trading like a value stock, but with growth stock qualities
The headline-grabbing result from Probiotec’s announcement this morning is undoubtedly its pro forma growth forecast.
Management is now expecting a 50% increase in revenues for FY21. Leading to a 75% and 49% increase in underlying EBITDA and underlying EPS, respectively.
All of which stems from serious guidance revisions. With revenue now expected to come in at a range of $159–163 million — a 34% upgrade from their revenue estimates provided just six months ago in January.
EBITDA and EPS estimates where much the same. With Probiotec now anticipating $29–30 million in earnings for FY21. Up 37% from the $21–22 million forecast set in January. Delivering a 16–17-cent earnings per share result, compared to the 10–11-cent estimate previously.
That is exactly the kind of growth you’d expect to see from the small-cap space.
Especially from such an exciting MedTech up-and-comer.
However, despite this incredible growth and future potential, Probiotec isn’t particularly revered by the market. After all, with this latest update, the stock now trades at a ratio of 1 for price to sales. Making it an extremely attractive proposition from a value standpoint.
Furthermore, with a P/E ratio of just 12.3, it is also extremely undervalued compared to the broader biotech industry on the ASX. A sector that is filled with not only high P/E ratios, but also plenty of stocks that don’t make any earnings whatsoever.
All of which, logically, would suggest traders simply don’t expect Probiotec to deliver the kind of growth that other stocks may. But, as today’s revised guidance figures demonstrate, that simply isn’t true at all.
Probiotec can, and has, made incredible strides in FY21.
And if they continue to do so in FY22 and beyond, it is hard to justify their already cheap valuation. Which is precisely why shareholders should be thrilled with today’s news.
There is a lot to like about Probiotec, even if it is still flying under the radar of most investors.
What’s next for Probiotec Share Price?
The good news is that management isn’t resting on their laurels, despite this fantastic result.
Already they are turning their attention to further improvements to drive growth. Including efforts to capture and retain even more high-quality customers by further leveraging of the Multipack-LJM assets.
On top of that, the company is also continuing to work on site consolidation within NSW. Aiming to reduce overall costs without compromising on revenue streams. An effort that should yield even better margins and results for shareholders.
Not to mention further merger and acquisition opportunities. With Probiotec hunting for possible ‘bolt-on’ businesses that could provide immediate access to new customers or synergistic capabilities.
So, again, investors have plenty to look forward to in terms of growth potential.
All while still retaining its attractive valuation. At least for now…
Probiotec certainly isn’t the only small-cap like this, though. There are dozens of overlooked and ripe investment opportunities to be found at the tail end of the ASX. Stocks that have just as much potential as most but have somehow fallen by the wayside in terms of market interest.
We’ve even put together a list of four of our favourites. Which you can read all about, for free, right here.
Because if there is anything to take away from Probiotec’s result today, it’s that eventually the market can’t afford to ignore stocks like this. Even if the writing has been on the wall for some time.
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here