Swedish beverage company Oatly (OTLY) has recorded a price drop of more than 50 per cent this year. Also, given the company’s weak bottom line and lean profit margins, would it make sense to buy OTLY now? Read on to find out.
Swedish oat milk and beverage company Oatly Group AB (OTLY) offers plant-based dairy products made from oats.
This barista version offers cooking products, regular and organic, crme frache, whipping cream, vanilla custard, and a variety of spreads including oat milk, frozen desserts, ice cream, yogurt, ready-to-go drinks, and cooking cream .
OTLY recently announced some serious business initiatives to strengthen its logistics. On June 9, 2022, OTLY launched electric-powered, heavy-duty trucks for the company’s ground transportation in North America.
This strategy aims to expand the company’s business in the US through better sustainable transportation. Also, on May 25, 2022, OTLY announced its “one hour delivery‘ Oat milk, frozen non-dairy dessert pints, and novelties in Los Angeles and New York City.
In the last one month, OTLY has gained 3.9% to close yesterday’s trading session at $3.77. However, it has declined by 86.3% in the last one year and 52.6% year-on-year.
Here’s what could shape OTLY’s performance in the near term:
For the first quarter ended March 31, 2022, OTLY’s revenue grew 18.7% year-over-year to $166.19 million.
However, its gross profit came in at $15.85 million, down 62.2% year-over-year. Also, its loss for the period stood at $87.46 million, compared to a loss of $32.38 million in the same period a year ago.
Its loss per share came in at $0.15, compared to a loss of $0.07 per share in the prior-year period. In addition, its negative adjusted EBITDA increased 217.7% year-over-year to $71.39 million.
In the context of further EV/sOTLY’s 2.41x, 38.1% higher than the industry average of 1.75x. Plus, its forward P/S of 2.52x is 124% higher than the industry average of 1.13x.
poor profit margin
OTLY’s trailing-twelve-month gross profit margin is 19.49%, which is 41.6% below the industry average of 33.39%.
In addition, its negative EBIT, EBITDA, and net income margins are 39.87%, 37.24%, and 39.96%, well below the positive industry averages of 8.52%, 12.14%, and 5.13%, respectively.
Power ratings reflect bleak prospects
OTLY has an overall rating of F, which equates to strong sales in our ownership power rating Arrangement
The POWR rating is calculated by considering 118 different factors, each factor weighted to an optimum degree.
OTLY has a quality grade of F, which is in line with the industry’s low profit margin.
The stock has a D grade for stability, with its 24-month beta in sync with 1.68. In addition, it has a D grade for value and growth, in line with its expanding valuation and deteriorating financial position.
35-in stock drink Industry, OTLY is ranked last. The industry has been given A status.
Click Here For additional power rating for OTLY (Momentum and Sentiment).
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While the company’s recent operating growth helped it post positive returns over the past one month, its weak financial position and inflated valuations remain a cause for concern.
In addition, analysts expect OTLY’s EPS to decline by 100% in the next quarter and 45.5% in the current year. Thus, I think it’s best to avoid OTLY for now.
How does Oatly Group (OTLY) stack up against its peers?
While OTLY has an overall POWR rating of F, none compare to its industry peers, Coca-Cola Consolidated, Inc. Might consider watching. ,Coke), which has an overall A (strong buy) rating, and Primo Water Corporation (PRMW), Ambev SA (above), and Carlsberg A/S (Cabgi), which has an overall B (Buy) rating.
OTLY shares closed Friday at $3.73, down $-0.04 (-1.06%). Year-on-year, OTLY has declined -53.14%, while the benchmark S&P 500 index has gained -22.73% during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist who has a passion for analyzing financial instruments. with Master’s Degree in EconomicsShe helps investors make informed investment decisions through her insightful comments.