TopGum Industries Ltd. develops, manufactures, and markets dietary and nutraceutical gummies. The company offers a range of gummiceutical supplements that include vitamins, minerals, natural extracts, pre and probiotics, and food products; and nutraceutical products. It also imports and markets other sweets. The company was incorporated in 2004 and is based in Sderot, Israel.

Israel

TopGum Industries Ltd.

Consumer Defensive

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

TPGM.TA reported revenue of USD 59mn in the last 12 months, up 30% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. 

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 25ppts and its growth accelerated by 11ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -5.2% in the last 12 months, a decline from 13.9% in FY23. 

Historically, TPGM.TA has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -10.9%, down from 7.0% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -7.3%, below the peers. 

TopGum Industries Ltd. reported a return on equity (RoE) of -10.0% in the last 12 months, down from 5.6% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to -6.1% in the last 12 months, a decrease from 3.8% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

TPGM.TA has below average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is very unstable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to bleak profitability, negligible return on capital, and poor working capital management. We note low margin volatility and an favourable capital structure, among the positive credit factors. 

In highly turbulent market conditions, TPGM.TA is volatile. In other words, the stock will fall much more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be large. 

In normal market circumstances, TPGM.TA is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from large to substantial. 

Considering past and projected metrics, the stock is distinctly 'cheaper' than its peers. 

TopGum Industries Ltd.

ILA 811.6

4

TopGum Industries Ltd.

ILA 811.6

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 811.6

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