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National Vision Grows on Positive Comps, Rising Costs a Woe

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On Mar 12, we updated our research report on National Vision Holdings, Inc. (EYE - Free Report) . The company has been continuously witnessing positive comparable store sales (comps) growth. However, rising costs can exert pressure on the bottom line of this Rank #3 (Hold) company.

This leading and rapidly growing optical retailer in the United States has been outperforming its industry over the past six months. The stock has climbed 10.5% against the industry’s 14.2% decline.

The company exited the fourth quarter with better-than-expected results. Year-over-year revenue growth was impressive as well. National Vision has been witnessing positive comparable growth on increased customer transactions over the last 72 straight quarters.

The company executed its core growth strategies well in 2019. It is optimistic about maintaining the growth momentum at its Legacy segment along with other brands. It is also steadily progressing with its omni-channel efforts to enhance customer experience and operating efficiency.

Over the last 72 consecutive quarters, comps have shown steady growth led by consistent in-store performance. In fourth-quarter 2019, comparable store sales grew 10.1%, whereas adjusted comparable store sales growth was 8.1%. The upside was driven by 9% comparable sales growth in America’s Best and 6.4% comparable sales growth in Eyeglass World.

In 2020, National Vision plans to continue to focus on its core growth drivers. The company believes that its ability to hold on to its optometrists has acted as a tailwind and plans to maintain it. Notably, its optometrist retention rate is scaling new highs fueled by continuous optometrist recruitments and retention programs. The company also aims at consistently driving comps growth.

Rising costs have been putting pressure on its bottom line. National Vision’s net margin trend has remained negative over the past two years. Escalating costs are putting pressure on margins and continue to be a concern for this company.

Moreover, the company’s high dependence on a limited number of suppliers exposes it to concentration of supplier risk.

Key Picks

Some better-ranked stocks from the broader medical space are ResMed Inc. (RMD - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc. (HRC - Free Report) .

ResMed has a projected long-term earnings growth rate of 14.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.

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