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UK stock investors have been starved of new opportunities for a few years now due to the ongoing IPO drought on the London Stock Exchange. In the first six months of the year, just a handful of firms went public, raising a paltry £160m.
However, Applied Nutrition‘s (LSE: APN) an interesting growth company that took the plunge in October 2024. It was the largest UK consumer IPO since 2021.
The stock’s done pretty well since, and City brokers are bullish, with three of the four analysts following the firm rating its shares a Strong Buy. The other one rates it a Hold.
Earlier this week, the sports nutrition and wellness brand released a strong trading update. This prompted Deutsche Bank to reiterate its Buy rating on the stock, as well as raise its price target from 180p to 190p.
With the share price currently at 147p, this suggest a near-30% uplift might be on the cards over the next 12 months. This isn’t guaranteed, of course, as anything can happen in the stock market. But were this to transpire, it would turn a £7,000 investment into almost 10 grand.
So what do the experts see in this stock? Let’s take a closer look.
Solid first year
Applied Nutrition formulates and creates nutritional products like vitamin drinks and protein powders. It has a bold ambition to become the world’s most trusted sports nutrition brand, and already sells in more than 85 countries worldwide (mainly to distributors and retailers).
On 19 August, the company reported its first full-year trading update covering the 12 months to 31 July. Revenue’s expected to have increased 24% to £107m, nicely ahead of the consensus for £100m. Adjusted EBITDA’s set to rise around 19% to around £31m.
Meanwhile, the year-end net cash position is expected to be ahead of market expectations at roughly £18.5m. Founder and CEO Thomas Ryder commented: “We are excited about the opportunities we have in the pipeline for the year ahead.”
Applied Nutrition has expanded its presence in Tesco and Asda, while a Coleen Rooney-branded wellness line is now in 500 Holland & Barrett stores. Rooney is also brand ambassador and shareholder of Applied Nutrition.
Other notable backers include Baillie Gifford, the very experienced growth investor, and JD Sports Fashion. Interestingly, the Middle East is the firm’s biggest export market, and it’s even secured shelf space in Walmart.
Looking ahead to this year, the firm also expects revenue to be ahead of the market consensus (£112.4m). So it’s certainly had a positive start to life as a public company. I can see why analysts are bullish.
Should I invest?
Turning to valuation, the stock has a forward price-to-earnings ratio of 15. That’s not particularly high for a global growth company.
That said, I’m worried that the barriers to entry in this industry are quite low. Every YouTuber seems to have their own sports nutrition brand nowadays! Competition’s an issue for me.
Weighing things up, I think the growth story is promising (and I love the firm’s innovative liquid creatine drinks). I’m just not sure yet that Applied Nutrition has a durable competitive advantage.
Nevertheless, I’m impressed enough to pop the stock on my watchlist to monitor its progress.
