One Canadian Small Cap That’s Worth a ‘Look’, So To Speak

Newly-listed Kits Eyecare, Ltd. (TSX:KITS) could become the next big winner in the Canadian publicly-traded eyewear space

Capital Ideas Media | May 4, 2021 | SmallCapPower: Canada’s biggest eyewear retailer New Look Vision Group Inc. (TSX:BCI) has been one of the top-performing stocks on the TSX over the past two decades, soaring nearly 2400% since 2001.

(Originally published on Capital Ideas Media on March 23, 2021)

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Recently, New Look agreed to be acquired by an investor group, which includes Quebec pension giant Caisse de dépôt, at a 25% premium to the closing price that day. These investors obviously see opportunity in this space, as the go-private transaction is expected to accelerate New Look Vision’s expansion into the U.S. market.

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Newly-listed Kits Eyecare, Ltd. (TSX:KITS) could become the next big winner in the Canadian publicly-traded eyewear space, “offering investors attractive exposure to the highly fragmented, high-margin eyecare market,” according to Canaccord Genuity analyst Derek Dley.

Mr. Dley has a $17 per share target price on KITS stock, saying the “Company’s focus on e-commerce only sales should command a higher multiple than brick-and-mortar peers, in our view, particularly in the challenging brick-and-mortar COVID-19 environment.”

“The company’s unique, 100-per-cent online-only business model should allow KITS to exceed the average industry growth rate, as e-commerce eyecare penetration is set to accelerate, in our view,” the Canaccord Genuity analyst said.

“The Company is run by a seasoned management team, which together owns 74 per cent of the shares outstanding and has demonstrated prior success in the online eyecare market. We believe the current valuation of 1.3 times our 2022 estimated revenue estimate, versus peers which trade at 2.9 times, represents an attractive entry point,” he added.

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