Applied Nutrition (LSE: APN) from the FTSE 250 is a relatively new addition to my portfolio, but it’s off to a flying start.
Since I bought the stock at 216p in mid-April, it has climbed to 281p, delivering a gain of 30%. And it’s up 35% in just the past month!
However, I have no desire to sell to make a quick buck. Instead, if the investment case remains intact, I intend to keep this holding for many years. Here’s why.
How does it make money?
Applied Nutrition formulates and creates premium sports nutrition supplements, including protein, creatine, pre-workout drinks, and energy gels. It also has a wellness range, selling collagen products and various vitamins and minerals.
Indeed, the firm sells over 120 products in more than 85 countries worldwide, including in high-street health retailers, gyms, supermarkets, and online. Approximately 91% of sales is business-to-business.
Due to this diverse product range, the brand appeals to bodybuilders, competitive athletes, and casual gym-goers, while nearly half of end customers are female.
One best-selling product is ABE (Europe’s most popular pre-workout brand). I have to say, ABE certainly adds an oomph to my workouts, but without causing a racing heart or sleep disruption like some poorly formulated alternatives.
Ahead of expectations
Following a strong first half driven by multiple product launches, the firm raised full-year guidance in February. About £140m in revenue was expected, up from the £133m that analysts previously had pencilled in.
On Monday (1 June), however, Applied Nutrition was back with an unscheduled trading notice. Due to continued sales momentum, it now expects revenue to be approximately £148m for the full year (ending July). That’s around 38% growth.
Additionally, the group announced the acquisition of Nutrablend, a US-based sports nutrition manufacturer for $16m (£12m). Its facility has an R&D design team, allowing the same vertically integrated model as Applied Nutrition’s UK operation.
This acquisition will provide a number of benefits:
- US production capacity of $300m in revenue per year
- Two newly acquired brands (Basic & GR8)
- Revenue opportunities from white label manufacturing
- Improved time to market with new prodcuts
- Lower freight, logistics, and import duty costs in North America
- Opportunity to cross-sell existing ranges to Nutrablend customers
- Earnings enhancing in FY27
Finally, the firm entered into a new licensing agreement with Mondelēz International to develop various sports nutrition products for North American markets. The range will be in 2,200 Walmart stores from August.
Demand across our markets shows no sign of abating and we are well positioned to deliver on what consumers need for their health and wellness journey.
CEO Thomas Ryder
Risks to monitor
Naturally, the firm faces a lot of competition, particularly in North America. And with UK inflation and unemployment ticking up, some consumers could struggle to afford premium supplements.
Another key risk here is some sort of quality control issue with the products, as this could damage trust in the brand.
Can it keep sprinting higher?
Overall though, I’m very bullish here, especially after the latest update. This is a profitable, founder-led company operating in a fast-growing global sports nutrition, health, and wellness market.
Despite the strong share price rally, the forward price-to-earnings multiple is 21.5. At this price, I think the stock’s still well worth considering as a long-term buy.
Should you invest £5,000 in Applied Nutrition Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Applied Nutrition Plc made the list?
Ben McPoland owns shares in Applied Nutrition.
