Kits Eyecare (KITS) AI Stock Analysis

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Kits Eyecare

(TSX:KITS)

Rating:77Outperform

Price Target:

C$16.50

▲(18.88%Upside)

Kits Eyecare's overall stock score of 77 reflects its strong financial performance and positive earnings outlook, driven by impressive revenue growth and strategic investments. The technical indicators support a short-term bullish trend, although the high P/E ratio suggests caution due to high valuation. Corporate events further bolster confidence in the company's future growth prospects.

Positive Factors

Earnings

Gross margin was 36.7% exceeding estimates, driven by strong organic growth of 34% for the third consecutive quarter.

Growth Opportunities

The company has the potential to double its capacity to ~$500M, indicating significant growth opportunities.

Product Development

Upcoming AI tools, termed 'Optician AI', are expected to enhance customer experience.

Negative Factors

Financial Performance

The Q2 EBITDA margin guidance is below street expectations due to planned marketing investments.

Guidance

Management guided Q1/25 revenue between $46-48M, a positive surprise, along with 4-6% Adj. EBITDA margin.

Valuation Concerns

KITS is valued at a lower multiple compared to e-commerce peers with similar growth rates, suggesting it remains notably undervalued.

Kits Eyecare (KITS) vs. iShares MSCI Canada ETF (EWC)

Market Cap

C$444.26M

Dividend YieldN/A

Average Volume (3M)25.68K

Price to Earnings (P/E)93.5

Beta (1Y)0.89

Revenue Growth34.10%

EPS GrowthN/A

CountryCA

Employees162

SectorConsumer Cyclical

Sector Strength59

IndustrySpecialty Retail

Share Statistics

EPS (TTM)0.05

Shares Outstanding32,006,916

10 Day Avg. Volume29,593

30 Day Avg. Volume25,676

Financial Highlights & Ratios

PEG Ratio0.00

Price to Book (P/B)9.46

Price to Sales (P/S)0.00

P/FCF Ratio18.61

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$16.63

Price Target Upside19.81% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Kits Eyecare Business Overview & Revenue Model

Company DescriptionKITS Eyecare is a leading online eyewear retailer that focuses on providing a wide range of high-quality eyewear products, including prescription glasses, contact lenses, and sunglasses. The company operates primarily in the e-commerce sector, leveraging a direct-to-consumer model to deliver a seamless shopping experience. KITS Eyecare prides itself on offering competitive prices, fast delivery, and exceptional customer service.

How the Company Makes MoneyKITS Eyecare generates revenue primarily through the sale of eyewear products via its online platform. The company's key revenue streams include the sale of prescription glasses, which often involve an upsell of premium lens options and coatings, and contact lenses, which cater to a recurring customer base due to the need for regular replacements. Additionally, KITS Eyecare may benefit from partnerships with eyewear brands and suppliers, allowing it to offer a diverse range of products. The company's direct-to-consumer model helps reduce overhead costs and increase margins, contributing to its overall profitability.

Kits Eyecare Earnings Call Summary

Earnings Call Date:May 06, 2025

(Q1-2025)

% Change Since: 22.51%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call highlighted impressive revenue growth, margin improvements, and strong customer acquisition and retention metrics. However, there is a planned increase in marketing expenses to drive further growth, which is expected to impact short-term EBITDA margins. Overall, the sentiment is positive due to the significant growth and strategic investments for future expansion.

Q1-2025 Updates

Positive Updates

Record Revenue and Growth Across Segments

Kits Eyecare achieved record revenue of $46.6 million, up 34% year-over-year. All four key segments grew over 30%, with glasses revenues growing 46%, contact lens revenues growing 32%, Canada growing 35%, and the U.S.A. growing 33%.

Significant Margin Improvement

Gross profit grew over 53% year-over-year, reaching $17.1 million. The gross margin expanded by 460 basis points to 36.7%, up from 32.1% in Q1 last year.

Strong Customer Acquisition and Retention

Kits welcomed over 95,000 new customers, a 28% increase year-over-year, with 62% of total revenue coming from returning customers. The Kits Autoship program contributed almost $6 million in revenue, up 11% year-over-year.

Successful Expansion of Premium Products

Revenue from premium upgrades grew nearly 60% year-over-year, with margins remaining healthy. The premium lens category now accounts for approximately 40% of total glasses revenue.

Operational Efficiency Gains

Fulfillment expense as a percentage of revenue improved to 10.9% from 11.9% last year. Marketing expense was 13.5% of revenue, with general and administrative expenses decreasing from 6.9% to 6.3% of revenue.

Negative Updates

Moderate Increase in Marketing Spend Expected

The Q2 EBITDA margin is projected to decrease to between 3% and 5% due to increased investment in customer acquisition.

Lower Average Order Value for New Customers

New customers typically have a lower average order size, impacting the overall average order value despite increased customer acquisition.

Company Guidance

During Kits Eyecare's Q1 2025 earnings call, the company reported a record revenue of $46.6 million, marking a 34% year-over-year increase, and exceeded their adjusted EBITDA margin guidance by achieving 7.4%, or $3.5 million. Revenue growth was driven by all segments, with glasses sales up 46%, contact lenses up 32%, and geographical growth of 35% in Canada and 33% in the USA. Kits also welcomed over 95,000 new customers, a 28% increase from the previous year, while 62% of total revenue was generated from returning customers. The company expects Q2 revenue between $48 million and $50 million, with an adjusted EBITDA margin of 3% to 5%. Despite absorbing high new customer growth, gross profit grew by over 53% to $17.1 million, with a gross margin expansion of 460 basis points to 36.7%. Kits also highlighted the success of its KITS+ loyalty program and premium lens upgrades, which contributed significantly to their robust performance.

Kits Eyecare Financial Statement Overview

Summary

Kits Eyecare demonstrates strong financial health, with impressive revenue growth and profitability improvements. While the balance sheet shows low leverage and a solid equity position, cash flow metrics confirm efficient cash management. The company is on a positive trajectory, though further improvements in operational efficiency and asset growth would enhance its financial profile.

Income Statement

Very Positive

Kits Eyecare showed strong revenue growth over the past years, with a notable increase from $91.6M in 2022 to $171.2M TTM. The gross profit margin improved significantly, reaching 34.8% TTM, indicative of efficient cost management. Net profit margin improved to 2.7% TTM, demonstrating profitability turnaround. However, EBIT and EBITDA margins, though improving, remain modest, suggesting room for enhancing operational efficiency.

Balance Sheet

Positive

The company's balance sheet is stable, with a debt-to-equity ratio of 0.16 TTM, indicating low leverage. The equity ratio stands at 60.2% TTM, reflecting a solid capital structure. Return on equity improved to 7.6% TTM, showing effective use of equity capital. However, the total assets have been relatively stable, suggesting limited asset growth.

Cash Flow

Positive

Cash flow performance is robust, with a positive free cash flow of $6.3M TTM, indicating effective cash generation. Operating cash flow to net income ratio is 2.0 TTM, showing strong cash conversion. Free cash flow to net income ratio of 1.34 TTM further confirms efficient cash flow management. However, fluctuations in investing and financing cash flows suggest potential volatility in cash reserves.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
171.15M	159.34M	120.51M	91.64M	82.40M	75.22M
	Gross Profit
59.59M	53.65M	40.79M	29.25M	20.89M	21.39M
	EBIT
7.14M	5.43M	-2.38M	-4.35M	-17.05M	122.00K
	EBITDA
9.90M	8.31M	1.86M	-721.00K	-14.68M	-1.80M
	Net Income Common Stockholders
4.66M	3.12M	-2.21M	-4.55M	-14.62M	-6.58M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
17.68M	19.27M	16.04M	18.79M	20.50M	2.31M
	Total Assets
101.17M	103.02M	87.64M	93.86M	90.94M	54.66M
	Total Debt
9.53M	12.60M	15.39M	19.44M	22.94M	22.33M
	Net Debt
-8.15M	-6.67M	-646.00K	648.00K	2.44M	20.02M
	Total Liabilities
40.25M	45.13M	36.20M	40.16M	36.16M	55.23M
	Stockholders Equity
60.92M	57.89M	51.45M	53.71M	54.78M	-573.00K
Cash Flow		Free Cash Flow
6.25M	9.88M	1.84M	4.42M	-23.09M	3.96M
	Operating Cash Flow
9.38M	13.04M	2.40M	4.68M	-19.46M	4.18M
	Investing Cash Flow
-3.12M	-3.15M	-563.00K	-258.00K	-3.63M	-225.00K
	Financing Cash Flow
-5.88M	-5.02M	-5.07M	-5.13M	41.48M	-4.84M

Kits Eyecare Technical Analysis

Technical Analysis Sentiment

Positive

Last Price13.88

Price Trends

50DMA

12.18

Positive

100DMA

10.81

Positive

200DMA

10.11

Positive

Market Momentum

MACD

0.61

Positive

RSI

59.83

Neutral

STOCH

52.74

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:KITS, the sentiment is Positive. The current price of 13.88 is above the 20-day moving average (MA) of 13.48, above the 50-day MA of 12.18, and above the 200-day MA of 10.11, indicating a bullish trend. The MACD of 0.61 indicates Positive momentum. The RSI at 59.83 is Neutral, neither overbought nor oversold. The STOCH value of 52.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:KITS.

Kits Eyecare Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
KITS	77 Outperform	C$444.26M	93.54	8.21%	―	34.10%	―
LNF	73 Outperform	C$1.92B	12.07	14.49%	2.85%	0.47%	9.41%
GBT	69 Neutral	C$429.54M	14.59	5.95%	2.71%	5.97%	174.18%
Sector *	63 Neutral	$6.98B	11.41	2.80%	4.24%	2.68%	-24.94%
ECOM	51 Neutral	C$6.83M	―	204.61%	―	-10.48%	94.56%
NTAR	43 Neutral	$6.46M	―		―	-36.77%	83.80%

* Consumer Cyclical Sector Average

Performance Comparison

TSE:KITS

Kits Eyecare

13.75

4.91

55.54%

TSE:NTAR

NexTech AR Solutions

0.03

-0.07

-70.00%

TSE:GBT

BMTC Group Inc.

12.77

0.29

2.32%

TSE:LNF

Leon's Furniture

28.21

6.67

30.97%

TSE:ECOM

Emerge Commerce Ltd

0.05

>-0.01

-16.67%

Kits Eyecare Corporate Events

Executive/Board ChangesShareholder Meetings

Kits Eyecare Reports 2025 AGM Voting Results

Positive

Jun 4, 2025

Kits Eyecare Ltd. announced the results of its 2025 Annual General Meeting, where all proposed resolutions were passed, including the election of six directors and the re-appointment of MNP LLP as auditors. The voting results reflect strong shareholder support, positioning the company to continue its focus on innovation and customer satisfaction in the digital eyecare industry.

The most recent analyst rating on (TSE:KITS) stock is a Buy with a C$11.25 price target. To see the full list of analyst forecasts on Kits Eyecare stock, see the TSE:KITS Stock Forecast page.

Business Operations and StrategyFinancial Disclosures

Kits Eyecare Achieves Record First Quarter Results with 34% Revenue Growth

Positive

May 6, 2025

Kits Eyecare Ltd. reported a record-breaking first quarter in 2025, with a 34% increase in revenue year-over-year, reaching $46.6 million. The company’s adjusted EBITDA also improved significantly to $3.5 million, marking its tenth consecutive quarter of positive adjusted EBITDA. The growth was driven by increased sales of glasses, with 104,000 pairs delivered, and a focus on acquiring high-value customers. This financial performance underscores the strength of Kits’ vertically integrated model and its strategic focus on operational efficiency, positioning the company for sustained profitable growth.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.