National Vision Holdings, Inc. ( EYE Quick Quote EYE - Free Report) has been gaining from increased demand for low-cost eye exams, glasses and contact lenses. The company’s strategy for 2021 looks encouraging. Moreover, the raised 2021 guidance buoys optimism. However, stiff competition and high dependence on vendors remain concerning.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 67.5% compared with 19.3% growth of the
industry and a 40.7% rise of the S&P 500.
The renowned provider of budget-friendly eye exams, eyeglasses and contact lenses to low-income consumers aims at making eye care and eyewear reasonable for all Americans. It has a market capitalization of $4.16 billion. The company projects 23% growth for the next five years and expects to maintain strength in its business segments. It surpassed estimates in each of the trailing four quarters, the average surprise being 106.84%.
Let’s delve deeper.
Factors at Play Comp Growth Holds Potential: In the pre-pandemic stage, National Vision had been continuously witnessing positive comps growth. In the first quarter of 2021, adjustable comparable store sales growth increased 35.8%. Eyeglass World delivered a 48.3% increase and America's Best delivered a 35.3% rise. The Legacy segment saw a nearly 30% comp increase. Strategies for 2021 Look Promising: National Vision plans to continue executing on core growth initiatives and further invest to strengthen competitive advantages. The company had a strong start with 25 openings in the first quarter and continues to plan to open about 75 stores in 2021. It has a solid pipeline of specific locations to open stores for 2021 and 2022. Moreover, the company will stay focused on investing in television advertising and digital marketing. National Vision’s lab network is well-positioned, with the capacity in place to handle the projected 2021 requirement. The company also remains focused to be a key low-cost provider. Image Source: Zacks Investment Research Raised Guidance: We are upbeat about National Vision’s raised 2021 outlook, which is indicative of the bullish trend. Net revenues are expected to be $1.975-$2.025 billion (an improvement from the previously announced $1.93-$1.98 billion).
Adjusted earnings per share estimates have also been raised to $1.07-$1.12 (up from the previously stated 88-93 cents).
Adjusted comparable store sales growth is expected to be 16-19% (up from the previously mentioned 13-16%).
However, National Vision operates in a highly competitive optical retail industry. The companies within the industry compete based on recognition of the brand name, price, convenience, selection, services and product quality.
Moreover, National Vision has ties with a very limited number of suppliers for the majority of its eyeglass frames, eyeglass lenses and contact lenses. Thus, high dependence on a limited number of suppliers exposes it to the concentration of supplier risk.
The company has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 21.1% north to $1.09.
The Zacks Consensus Estimate for its second-quarter fiscal 2021 revenues is pegged at $494.7 million, suggesting a 90.3% surge from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks from the broader medical space are
Envista Holdings Corporation ( NVST Quick Quote NVST - Free Report) , Inogen, Inc. ( INGN Quick Quote INGN - Free Report) and Phibro Animal Health Corporation ( PAHC Quick Quote PAHC - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
Phibro Animal Health has an estimated long-term earnings growth rate of 11%.
IDEXX Laboratories has a projected long-term earnings growth rate of 20%.
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