Update on French nano cap quality company
Hello.
Quality and nano cap don’t mix? This company boost 13% net margins in a depressed environment and pays dividends.
In 2022 I profiled a nano cap. ($)
2-Made in France bio products startup, profitable and 9 PE ratio
This stock is part of my favourite french hidden champions, like Poulaillon or Bastide (thesis available on this substack).
This did not work out as the share was pretty much flat including dividends. Not everything I buy turns to gold!
Buying at a value price protected the downside, but it was not a good investment due to inflation, the war and losing the Russian market, and a slowdown in sales.
However, it remained profitable with good margins, paid dividends, and it’s set for a new round of expansion, with the entry into the US market and into perfumes. It is a quality nano cap after all.
We are now at PER 12, and more like 10 if you discount the net cash, and less than 10 if you discount inventory which is durable. We have 31% earnings growth in 2024 and further recovery expected for 2025.
But not all earnings growth are equals.
I could say “QUALITY COMPANY WITH 31% EARNINGS GROWTH SELLING FOR 10 TIMES PROFIT”, but this is a recovery and 30% earnings growth or even 100% means nothing about a company’s growth profile if it is a recovery. I don’t think it’s honest to talk about earnings growth when it’s just recovering past margins.
Future growth is probable, but not guaranteed. Downside is limited. And this is how we aim to perform well.
I still like the idea.
**Warning Illiquid nano cap** Really, it’s only for the most patient investor. There is a huge spread, and news once a year or two maximum. And no English reporting.