Strong demand positions Thorne HealthTech (THRN) to continue outperforming the market

Thorne HealthTech (THRN) reported its fourth quarter results last night. Net sales and adjusted earnings of $1.1 million for the period of $63 million and 13 cents per share were 3 cents below consensus expectations respectively, but still marked a new record performance. We continue to see excellent top-line growth year-over-year. 27.7%. Sales increased 46.1% and 17.5% to $25.6 million and $37.3 million, driven by sustained strong demand across both direct-to-consumer (DTC) and professional/B2B channels became. A network of medical professionals. And even though net selling of high-cost raw materials that the company prudently secured earlier this year (and to help maintain/grow market share) squeezed margins a bit more than expected. The profit has almost doubled from the 7 cents earned. last year.

Additionally, THRN’s forecasts for 2023 net sales and adjusted earnings of $280-290 million and 37-39 cents per share appear to fall short of the mark by an even wider margin. . $298.4 million — primarily due to the additional investment required to complete the recently announced expansion and upgrade of a major manufacturing facility in South Carolina. The effective tax rate has more than doubled from just 10% in 2022 to 26%. In fact, excluding the impact of facility expansion on margins and assuming the same tax rate, the midpoint of THRN’s adjusted earnings guidance fits right into the streetscape. But even though this drag is holding back, the company’s outlook suggests 25% and 19% top and bottom line growth, supported by strong sales trends THRN continues to see. I’m here. , has met new record-level orders every month so far this year.

Longer term, we continue to expect THRN to benefit from the expansion/upgrade of this facility. This will give THRN full control over the manufacturing process from formulation to production. These investments will not only enable us to better supply our customers and respond more quickly to changing product demands compared to our competitors who rely on third-party contract manufacturers, but also to provide personalized You can create packages and improve your printing operations. More importantly, this kind of in-house production helps ensure that the product quality is up to the high standards set by his THRN. This, in my opinion, is one of the company’s greatest competitive advantages. This reflects THRN’s expected profit margin growth as the extra cost of training a blue-collar workforce to operate new machinery wears off and this expanded and more efficient production capacity continues to expand. Combined with the improvements, I think THRN is well positioned to reap even more benefits. This year and beyond, top-line and bottom-line growth is even stronger.

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In my view, this is probably the biggest reason why THRN’s stock has held up better than expected today against a company that just released a significantly lower than expected full-year earnings forecast. That said, given accelerated growth and much stronger free cash flow,
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These plant expansions/upgrades should also help in the long term, and THRN’s share price is trading at attractive valuations compared to weaker-than-expected earnings guidance, so there’s no downside at all. I think.