Based in Duluth, Georgia, optical retailer National Vision Holdings, Inc. (EYE) entered 2021 with strong momentum despite coronavirus-pandemic-related economic qualms. Double-digit comparable store sales growth and higher demand for its low-cost eye-care and eyewear offerings should help the company outperform the broader market in the near term. The stock has gained 210% over the past year and 38.1% over the past nine months.
EYE’s continued expansion in both existing and new markets, and an impressive top-line performance in the last reported quarter, should position it with sustainable growth opportunities in the future.
Given the company’s strong balance sheet, resilient business model and expanding footprint, we think the stock is worth betting on now.
Here are the factors that could help EYE continue its upward trajectory:
Increasing Penetration in Both Existing and New Markets
During its fiscal fourth quarter, which ended January 2, 2021, EYE increased its long-term projected whitespace opportunity by 300 stores to at least 2,150 locations. The company expects its branded store—America’s Best—to expand to at least 1300 locations, compared to its previous estimate of 1000. Furthermore , EYE opened five new stores over the period and recorded a 4.7% increase in store count in the past year. Given its sizable whitespace opportunity and increasing penetration, the company should see exponential growth in the near term.
Growing Demand for EYE’s Eyewear Offerings
Strong pent-up demand from customers and patients for the company’s affordable eye care and eyewear offerings should contribute to higher sales across its digital and omni-channel platforms. In fact, with more customers gravitating toward newer technology contact lenses that are highly priced, EYE is well positioned to drive revenue growth.
Favorable Analyst Estimates
Analysts expect EYE’s EPS to rise 143.9% in the next quarter, ending June 30, 2021, and 19.1% in its fiscal 2022. Its EPS is expected to grow at a rate of 12.1% over the next five years. EYE’s revenue is expected to grow 77.1% in the next quarter, 14.5% in the current year, and 9.2% next year.
Impressive Quarterly Performance
EYE’s net revenue increased 23.6% from its year-ago value to $496.7 million in the fourth quarter, ended January 2, 2021. Its comparable store sales growth was 14.3% over this period.
Also, the company’s adjusted EBITDA increased 118% year-over-year to $83.5 million, while its adjusted operating income rose 281% from the prior-year quarter to $62.8 million. Its net income increased 795% from the prior-year quarter to $35.1 million, while its EPS rose 779% year-over-year to $0.42.
Consensus Price Target Indicates Upside
Wall Street analysts expect EYE to hit $51 in the near term, which represents a potential upside of 3.18%. Of 12 analysts that rated the stock, five rated it a Strong Buy and five rated it Buy.
POWR Ratings Indicate Solid Prospects
EYE has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, EYE has an A grade for Growth, in sync with the company’s impressive, expected revenue and earnings growth.
It has a B grade for Quality. EYE’s trailing-12-month gross profit margin of 53.7% compares favorably with the industry average 33.3%.
EYE is currently ranked #13 of 37 stocks in the B-rated Specialty Retailers industry. In addition to the grades we’ve highlighted, one can check out EYE’s POWR Ratings for Sentiment, Stability, Momentum, and Value here.
If you’re looking for other top-rated stocks in the Specialty Retailers industry, with an Overall POWR Rating of A or B, you can access them here.
Increased customer demand in both eyewear and contact lenses categories, and higher comparable store sales growth, have bolstered EYE’s fortunes significantly. Moreover, the company’s large scale expansion plans should help it drive long-term growth, leveraging the strength of its balance sheet. In addition, EYE’s robust financials and its expected earnings and revenue growth make it a wise investment option right now.
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EYE shares were trading at $43.03 per share on Tuesday afternoon, down $0.57 (-1.31%). Year-to-date, EYE has declined -4.99%, versus a 5.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.Why Investors Should Keep Their Eye on National Vision Holdings appeared first on StockNews.com