Buffett Would Approve of This 1 Stock!

New Look Vision Group Inc. (TSX:BCI) is a provider of eye care products and services. Is it a good investment?

edit Person using calculator next to charts and graphs

Image source: Getty Images.

You don’t have to have 20/20 vision to see that New Vision (TSX:BCI) is an excellent investment. Its revenues have increased every year since fiscal 2014 from $140 million to $291 million in fiscal 2018.

Net income has almost doubled from $8 million in fiscal 2014 to $14 million in fiscal 2018.

New Look sells sunglasses, eyeglasses, ophthalmic glasses, and contact lenses under its four brands that include New Look Eyewear, Vogue Optical, Greiche & Scaff, and iVision.

The company operates 210 corporately owned eye care stores across its brands, which are located in Quebec, Ontario, the Atlantic provinces, British Columbia, and Saskatchewan. It also operates a lens processing laboratory and a distribution centre.

Its business model is relatively simple with the majority of revenue being generated through its retail sales. For those of you unfamiliar with Warren Buffett’s investing style, he only invests in businesses that he understands. New Look provides an ideal opportunity for investors, as it is in the business of selling glasses.

New Look is a good investment based on its acquisition of Iris and its increasing net income.

Acquisition of Iris

New Look completed the acquisition of Iris in fiscal 2017. This has been one of the company’s largest acquisitions to date with a purchase price of $120 million on a cash-free and debt-free basis (CFDF).

The CFDF acquisition model means that Iris is responsible to pay off all debts before the sale but it also benefits through the extraction of all cash from the business prior to the sale. This was a significant decision on the part of New Look as Iris has 147 locations across Canada.

This acquisition was estimated to generate consolidated revenues in excess of $265 million and a profile of 379 locations Canada wide.

The acquisition was financed through a combination of its term facility with its bank, a debt facility, and subscription receipts (a promise by a company to sell a given number of shares to an investor at a certain price).

According to New Look president Antoine Amiel, “We will be the dominant player in Quebec, the Atlantic Provinces and British Columbia. This should lead to greater efficiencies and lower operating costs in many areas of operations.”

Increasing net income

The company’s net income has increased from $8 million in fiscal 2014 to $14 million in fiscal 2018. This represents a compounded annual growth rate of 12.50%, which is impressive.

The company has an accumulated net income of $52 million over the past five years with no preferred stock dividends, which is a good sign for investors. A growing net income with no frivolous dividend payments indicate that the company is fiscally responsible.

Bottom line

New Look is doing a great job at growing its business, which is demonstrated by its acquisitions and increasing net income.

The company’s acquisition of Iris solidifies its footprint across Canada and gives the company greater exposure to Canadians. With net income increasing from $8 million in fiscal 2014 to $14 million in fiscal 2018, investors would be silly to not consider making an investment.

While I acknowledge online glasses retailers present a challenge to the glasses industry, the need to ensure it fits well makes retailers unlikely to go away anytime soon.

If you liked this article, click the link below for exclusive insight.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chen Liu has no position in any of the stocks mentioned.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »