FoggyIsle.XYZ | Market's view on Supreme Plc

Supreme PLC has announced a significant increase in its fiscal year profits, with a reported Adjusted EBITDA of £38 million, almost doubling from the previous year’s £19.4 million. The company has also increased its revenue to approximately £225 million, up from £155.6 million the previous year, and concluded the year debt-free while generating unprecedented cash levels.
A stock watcher suggests the possibility of the CEO taking the company private, noting that the CEO owns more than 50% of the company and could potentially raise the debt to buy the remainder. However, this would require approval from institutional investors for a favourable buyout price.
Concerns are raised regarding the prospect of private equity taking over Supreme, largely due to its strong cash generation and the inconvenience of being a publicly listed company, especially amidst the scrutiny of vaping products.
The market is noted to undervalue the company, with a specific reference to its P/E ratio being around 6x despite its strong financial performance, zero debt, and excellent cash flow, suggesting the stock is significantly undervalued.
Speculations are made about the potential imposition of a duty on vaping liquids by October 2026, which could affect the vaping industry. The delay in implementation suggests a longer period for companies to adjust and strategize.
The introduction of vaping taxes is seen as a positive for the industry as it suggests government recognition and regulation rather than outright prohibition, which could secure future earnings for companies in the sector.
There’s commentary on the potential benefits to lower-priced vape brands from the new tax regime, suggesting that more expensive brands might see a smaller percentage increase in prices compared to cheaper brands, which could shift consumer preference towards more affordable options.