Remember Goodfood Market (TSX:FOOD) — that company pretty much every Canadian ordered during the beginning of the pandemic? Yeah, I was one of those people who also ended up purchasing shares of the stock again and again. In fact, I still have them. Why? Because after so much loss, I might as well continue to hold them in hopes some improvements happen.
But I have to admit when I was wrong, and I was wrong about Goodfood stock. So, let’s look at what happened and whether there is a shot that this company could climb back from the ashes.
First, a history lesson
Goodfood stock had been around for a while, but the pandemic certainly saw a major increase in the company’s use. It was and indeed remains the number one Canadian meal-kit provider. It continued to expand its options as well as locations across the country.
From there, Goodfood also expanded to other options. You could purchase grocery items, with some locations being able to receive those items the same day! It all seemed as if the company was setting itself up for greatness.
So, what happened?
Pandemic ends and costs rise
After the pandemic restrictions came to an end, inflation and interest rates started to rise. Canadians not only wanted to get back to the grocery store and cook for themselves, but they needed to save money. And all the free trials weren’t going to save the cost of what really does end up being more to purchase than making your own food.
Furthermore, there are now more options than there were before. So, all combined, Goodfood stock went from the highest demand it had ever seen to struggling to get by. But has it really been that bad as of late?
During its most recent earnings report, Goodfood stock reported net sales of $42 million, which was 37% lower than the year before. However, it reported a record quarterly unadjusted gross margin of 41%, which was a 14.8% improvement. This included a gross profit of $17.3 million, down from $17.6 million the year before. This added up to a net loss of $1 million, a $20 million improvement from the year before.
What now?
The big question is, however, does the current share price really reflect how Goodfood stock has been performing? Granted, I don’t believe we’re going to see it climb from $0.40 per share to $12 any time soon. However, it does indeed look oversold — especially considering its recent upgrades.
Goodfood stock now forecasts positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for 2023. This comes after creating a lean cost structure and expectations to continue building up in 2024.
So, now, Goodfood stock looks undervalued. Shares are in the trash, and it doesn’t look like it will climb by much as we continue in this bear market. However, there is still a major industry for meal-kit delivery. Goodfood stock was just one of those companies that grew too much, too soon, along with many others. So, it will certainly need to find more ways of improving its bottom line and getting customers to come back.
And should it do this, which is possible as inflation and interest rates flatten, then shares could climb once more. But in the meantime, it certainly hasn’t delivered as I thought it would back in 2020.
