Valued at a market cap of $533 million, Kits Eyecare (TSX: KITS) operates a digital eyecare platform in the United States and Canada. It manufactures progressive and contact lenses, eyeglasses, and frames under the KITS brand, as well as distributes eyewear products of various brands. Kits operates a network of optical e-commerce websites, including KITS.com, KITS.ca, OptiContacts.com, and ContactsExpress.ca.
In the last three years, the small-cap TSX stock has returned 575% to shareholders, crushing broader market returns by a wide margin. Let’s see if Kits Eyecare stock is still a good buy right now.
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How did Kits Eyecare stock perform in Q2 2025?
In Q2 2025, Kits Eyecare reported record sales of $49.6 million, an increase of 31% year over year above its midpoint guidance of $49 million. The Canada-based digital eyecare provider also achieved its 11th consecutive quarter of positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) at $2.6 million, indicating a margin of 5.2%.
The standout performance came from the company’s glasses segment, which generated $7.2 million in revenue, up 44% year-over-year. Kits delivered over 112,000 pairs of glasses during the quarter, a 53% increase from the prior year.
Premium lens upgrades accounted for 46% of glasses revenue and grew 58% annually, which suggests that customers are gravitating toward higher-value products.
Growth markets
Canada emerged as a key growth driver, with revenue in the region growing 44% year-over-year. This strength was attributed to new and returning customers across glasses and contact lenses, reflecting the success of the company’s “Own This Town” localized marketing strategy. The initiative has generated increased awareness in targeted markets, contributing to improved customer acquisition metrics.
Kits welcomed over 111,000 new customers in Q2, a record for the company and a 55% increase from last year. These new customers contributed over 39% of revenue in the June quarter. The company’s two-year active customer base now exceeds 991,000 people, growing 13% annually, with repeat customers representing over 60% of Q2 revenue.
Gross margins expanded to 36.3%, up 350 basis points year-over-year, despite absorbing the impact of record new customer growth. The margin improvement was driven by a higher mix of glasses sales and premium lens upgrades, in addition to tighter promotional controls. Its vertically integrated manufacturing model continues to provide competitive advantages in quality and cost efficiency.
Outlook
Kits projects Q3 revenue between $52 million and $54 million with adjusted EBITDA margins of 5-7%. It expects marketing expenses to moderate slightly while maintaining gross margin improvements.
Management highlighted the launch of OpticianAI, a technology platform designed to enhance frame selection and customization, as customers report superior online experiences compared to traditional retail channels.
The results underscore Kits’ strategy of building lifetime customer relationships through superior digital experiences while maintaining operational discipline and margin expansion.
Is the TSX stock undervalued?
Analysts tracking Kits Eyecare forecast revenue to grow from $159 million in 2024 to $294 million in 2029. In this period, adjusted earnings are estimated to grow from $0.04 per share to $0.81 per share.
Today, KITS stock trades at a forward price-to-earnings multiple of 68.4 times, which might seem lofty. However, this steep multiple is supported by robust growth estimates. If KITS trades at 40 times forward earnings, the TSX stock could roughly double over the next four years.
