Here is the bottom line on Kits Eyecare (TSX: KITS): the stock is down roughly 50% from its peak, and that gap between price and performance is what makes it worth your attention right now.
Kits wrapped up its 14th consecutive quarter of organic revenue growth above 20%. Valued at a market cap of $368 million, Kits is a compounding machine hiding behind a beaten-down stock price, making it attractive to long-term investors.
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Kits Eyecare is growing at a category-leading pace
Total revenue in Q1 rose 23% year over year to $57.5 million. Compared to Q4, the top-line grew by $3.6 million or 7%.
Glasses revenue jumped 61% year-over-year to $10.8 million. The company delivered over 156,000 pairs of glasses in Q1, a 50% increase from the same period a year ago.
Premium lens upgrades now account for 42% of glasses revenue. Digital progressive lenses grew by over 65% year over year. And the average order value for glasses is roughly 35% higher than it was a year ago.
Chief Executive Officer Roger Hardy put it plainly on the company’s Q1 2026 earnings call: “Glasses are transitioning from a growth vector to a core driver of both revenue and margin.”
One of the most underappreciated parts of the Kits story is how sticky its customers are.
- Repeat customers represented 63.9% of total revenue in Q1.
- That figure has remained above 60% in every quarter since the company went public in January 2021.
- Nearly two-thirds of every dollar Kits earns comes from people who have already bought from the company and came back on their own.
- Customers in the 2021 contact lens cohort grew from roughly $151 in year-one revenue per customer to over $450 in cumulative revenue over four years. And the newer cohorts are starting even higher.
- The 2026 glasses cohort is generating first-order revenue approximately 62% higher than that of the 2025 cohort, which entered at the same price point.
That means the platform is compounding, and each new batch of customers is worth more than the last.
The bull case for the TSX stock
Kits ended Q1 with $19 million in cash and no long-term debt. The company repaid its full $10 million credit line at the start of the year and also has a $15 million undrawn facility with Bank of Montreal.
Adjusted EBITDA came in at $4.1 million, or 7.2% of revenue, the highest adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in company history. It was also the 14th consecutive quarter of positive adjusted EBITDA.
The gross margin expanded to 40.9% in Q1, though $2.1 million of that was attributable to a one-time tariff refund. Strip that out, and the underlying gross margin was still over 37%, which is a year-over-year improvement on its own.
Management expects gross margins to exceed 50% in the coming years as glasses become a larger share of total revenue.
For Q2, Kits guided for revenue between $57 million and $59 million, with adjusted EBITDA margins of 3% to 5%. For the full year, management targets constant-currency growth of 25% to 30%.
Is KITS stock undervalued?
Stock prices and business fundamentals can diverge for extended periods, especially for small- and mid-cap companies. Kits is a clear example, given that the TSX stock is down 50% from all-time highs. Alternatively, the business continues to grow profitability while expanding profit margins and widening the customer base.
Its vertically integrated manufacturing lab in Vancouver gives Kits a cost advantage that traditional optical retailers cannot match.
Its artificial intelligence-powered OpticianAI tool is increasing conversion rates and driving customers toward higher-value lens options. Revenue per employee has grown from roughly $600,000 to approximately $1 million, a sign the business is scaling efficiently.
Analysts tracking the TSX stock forecast adjusted earnings to expand from $0.12 per share in 2025 to $1.01 per share in 2030. If KITS stock is priced at 20 times forward earnings, which is reasonable, it could double within the next four years.
