Zacks Investment Research has recently initiated coverage of Better Choice Company, Inc. BTTR with a Neutral recommendation, reflecting a balanced outlook on the company’s performance and prospects in the competitive pet care industry.
Better Choice achieved a significant milestone in the third quarter of 2024, reporting its first profitable quarter in over four years with adjusted EBITDA of over $0.2 million and gross margins improving to 40%. Operational efficiencies, including a 48% reduction in inventory levels and a 97% supply chain fill rate, supported these results and positioned the company for sustained profitability into 2025.
The company’s growth is heavily driven by its performance in international markets, particularly in the Asia-Pacific region. China, a key market, is experiencing a surge in pet ownership, driven by younger demographics seeking premium pet products. Better Choice’s Halo brand, known for its health-focused, sustainably sourced nutrition, is well-positioned to capitalize on these trends and expand its footprint in one of the fastest-growing global markets, as outlined in the research report.
Better Choice’s acquisition of SRx Health Solutions strengthens its revenue diversification strategy and adds significant scale to its operations. SRx’s established specialty pharmacy network and profitability align with the company’s plans to enter the veterinary pharmaceuticals market under the “Better Pet Rx” initiative. This move complements its core pet nutrition offerings, presenting new growth opportunities across multiple verticals.
The company has also made notable progress in its digital sales channels, which account for a significant portion of its revenues. There has been an increase in repeat purchases and strong subscription growth, highlighting the potential of its e-commerce strategy to deliver scalable, higher-margin revenue streams.
Despite these advancements, Better Choice faces key challenges, as highlighted by the research report. Its reliance on Asia-Pacific markets makes it vulnerable to regulatory, economic, and competitive risks. Liquidity concerns persist, with recent capital raises signaling ongoing reliance on external financing to fund operations and growth initiatives.
Elevated competition in the premium pet food sector, dominated by major players like Mars and Nestle, underscores the need for continued investment in branding and innovation. Additionally, rising marketing and operational costs could pressure margins, especially as the company works to optimize its supply chain and expand its market presence.
Better Choice stock has shown notable underperformance compared to its peers and the broader market. It is trading at a significant discount relative to industry averages, reflecting investor caution regarding the company’s financial structure and market positioning. However, the discounted valuation could present a potential upside if Better Choice continues to execute its operational and strategic initiatives effectively.
While the company’s recent profitability and strategic initiatives highlight encouraging growth opportunities, challenges related to competition, liquidity and reliance on specific geographic markets present notable risks. Investors seeking a deeper understanding of Better Choice’s potential and a comprehensive evaluation of its opportunities and challenges can read the full Zacks Investment Research report on BTTR.
Read the full Research Report on Better Choice here>>>
Note: Our initiation of coverage on Better Choice, which has a modest market capitalization of $4.2 million, aims to equip investors with the information needed to make informed decisions in this promising but inherently risky segment of the market.
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