Smallcap stocks may be under pressure. But not all are being pulled down by the decidedly bearish sentiment. Cosmos Health (NASDAQ: COSM), formerly Cosmos Holdings, is decoupling from the weakness and is doing so on merit, not hype. In fact, its recent 28% surge to $0.46 in September is supported by another batch of excellent news, which added to an already compelling value proposition resulting from several milestones reached earlier this year. These included a triple-digit percentage increase in EBITDA, global market expansion, and product listings on the world’s largest E-commerce platform.
Most recently, this global healthcare group announced that its proprietary line of nutraceuticals, Sky Premium Life, has entered into an exclusive agreement with Mediprovita GbR. to sell its Sky Premium Life products in Germany and Austria starting in Q4. It’s no small placement, either. The initial order is for 20 SKUs and will be sold through Amazon (NASDAQ: AMZN), eBay (NASDAQ: EBAY), and Mediprovita’s e-commerce website. Moreover, it’s likely the precursor to a more significant deal, with COSM saying it expects its relationship with Mediprovita to broaden to an agreement to eventually distribute upwards of 70 products.
Mediprovita is no small player. They’re a full-service distributor and logistics provider of consumer products with over 30 years of experience and ideally positioned to maximize sales of Sky Premium Life products in Germany and Austria. Initial representations include Mediprovita distributing COSM’s proprietary, luxury, and high-quality nutritional supplements, including a complete range of vitamins, minerals, herbs, and unique formulas. The newest agreement takes advantage of Mediprovita’s established two-year presence in the market, which they say has been met with great success. Better yet, they added that based on its internal market research, they expect SPL products to quickly penetrate the German and Austrian markets and generate robust sales in the process.
New Deals Strengthen Revenue-Generating Momentum
That’s likely. The German market for Nutraceuticals is the largest in Europe. And with the inclusion of Austria helps fuel a global roll-out strategy, which is being expedited by having its products available on Amazon in the United States, United Kingdom, Canada, and Singapore.
Those placements help feed growing global demand. According to Mordor Intelligence, the European nutraceuticals market is expected to grow at a 7.5% CAGR and surpass $100 billion by 2027. COSM’s nutraceuticals distribution push into Germany can take advantage of a sizable opportunity, targeting the roughly $14 billion in sales up for grabs through that country’s 14% share. While the nutraceuticals market is significant now, expect it to get larger, with the rising healthcare costs and an aging population fueling the category’s growth.
That’s not the only recent deal. In August, COSM announced that its subsidiary, SkyPharm S.A., a pharmaceutical wholesaler and distributor, launched its first Sky Premium Life products on Amazon in the United States. It’s the first of several expected listings, with COSM expecting at least 85 SKUs on Amazon by year-end. That does more than adding another milestone reached into the crosshairs; it can add a substantial revenue-generating tailwind into 2023.
A COSM Mission To Grow Bigger Faster
It’s all part of a defined mission to grow bigger, faster. That’s a mission in progress facilitated by COSM expanding its presence into the global pharmaceutical sector through subsidiaries in Greece and the UK. Those companies are seizing low-hanging revenue-generating opportunities from generic and over-the-counter medication production, a segment putting substantial near and long-term income growth in its crosshairs. That’s not all in play.
Beyond taking advantage of opportunities presented in the branded and generic pharmaceuticals space, COSM is expanding its market presence to capitalize on surging demand in the health and food supplements products markets. Its performance in those sectors is already showing impressive results, with COSM reporting its gross profit margins rose to 14.2% from 11.5% compared to the six months last year. That led to COSM generating positive operating income for the first half of 2022 and, better still, momentum into the second half of this year.
So, while its 202.42% increase in Adjusted EBITDA for the first six months of this year is impressive, it may only be the precursor of better times ahead, supported by continued product penetration into new global business channels. Those will add to its bullish performance from Sky Premium Life, which posted a 23% increase in gross profit and a positive EBITDA of $0.8 million through June 2022. And with the launch of Sky Premium Life’s new premium supplement line, already impressive numbers could earn a multiple.
That’s the intent from launching Mediterranation, a high-quality new supplement featuring antioxidants and anti-inflammatory ingredients, including hibiscus, dittany of Crete, kritamos, and more. The unique formulation targets opportunities from a fast-growing specialized supplement market, with demand surging from consumers wanting high-quality ingredients sourced from the Mediterranean. Cosmos Health not only expects to serve that market; they plan to do well in it, anticipating a positive reception to Mediterranation’s release and a substantial contribution to revenues in Q4 and 2023.
Understanding The Markets
That optimism is warranted by COSM’s understanding of the markets they serve, the result of research providing actionable data on product availability, trends, pricing, and patent expirations. Specific to its pharmaceuticals interests, the insights gained strengthen COSM’s competitive edge by bringing into focus opportunities presented by patent expiration, pricing fluctuations, and market inefficiencies, including filling gaps in underserved markets.
That leads to COSM maximizing opportunities by knowing what products are in demand and which would do the best in given markets. And since COSM can capitalize on new opportunities by developing its own brand of products, profit margins can be significantly higher. Their Research and Development program plays a further role in its planning and manufacturing initiatives leading to a current focus on seizing the demand surrounding nutraceuticals and food supplement products related to pharmaceuticals.
It does more. It expedites COSM in making the right business decisions and defining a pathway to determining which products will be the most profitable while satisfying customers’ needs. Research does another thing; it keeps COSM on point, helping them source and create the highest quality formulations to keep consumers confident they are receiving the best product at the best price.
Most notably, productive research and development programs also lead to making the right acquisitions at the right time.
Acquisitions Accelerate Global Presence
Cosmos Health checks that box, too. Through its Thessaloniki, Greece, based company Sky Pharm SA, COSM can import and export excess medicines to the EU. That unit is taking advantage of rising demand created by medication prices increasing significantly in European markets. Benefits from Sky Pharm could accrue near term, noting it’s already in compliance with GDP (Good Distribution Practices), ISO certified by TUV NORD, and approved to sell products by the ΕΟΦ (the Greek equivalent to the FDA).
Another contributing subsidiary is UK-based pharmaceutical wholesaler Decahedron Ltd. This company imports and exports prescription and generic medications, OTCs, and medical devices globally, with a network of 25 clients and vendors in nine countries. That’s not all.
A third subsidiary, Cosmofarm, leverages decades of experience in the wholesale pharmaceutical sector. Based in Athens, Cosmofarm is authorized by the National Organization for Medicines under Good Distribution Practices to source and distribute various products to over 1,000 pharmacies. Its network of roughly 250 manufacturers and wholesalers supplies pharmaceuticals, food supplements, and medical devices for export. These subsidiaries do more than position COSM for potentially exponential growth; they provide diversification, which mitigates downside risk.
Riding The momentum From A Solid 1H/2022
But the real story isn’t about risk mitigation. It’s about the value proposition presented by COSM’s sum of its parts, a total that validates the case for COSM being significantly undervalued despite its recent run. And more than a case built on intrinsic and inherent assets and potential, COSM provides something better- evidence of substantial growth. That’s shown by 1H/2022 financials that indicate robust top and bottom line growth that, more importantly, come with a tailwind.
Thus, is the value proposition too good to ignore? The answer is yes for those liking low-priced exposure to hypergrowth-paced companies. Even more than its growth pace, COSM is doing it the right way, seizing on market opportunities that are not only in its operating wheelhouse but ones that can drive revenues higher faster. Best of all, for those interested, compelling products, breadth of market exposure, and a results-driven management team should keep its growth trajectory well-fueled. That means that for investors considering, the proposition is more than compelling; it’s timely.
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