InnovaDerma (LON:IDP) reported results on 21 February for the first half of the full year (FY) to June 2019. Results were in line with January's trading statement, with first half (H1) revenues down 7.5% driven by disruptions to the direct-to-consumer (DTC) sales channel. The company has indicated that a number of elements are in place to drive a strong acceleration in H2 - DTC Issues resolved, major new high-street retail channels, ongoing growth in the Roots haircare range. We examine these drivers in this report (p2 and p3)
The shares have de-rated materially in valuation terms and now trade on a 2019e price/earnings (P/E) multiple of 9.9x and enterprise value (EV)/sales of 0.9x. We argue that these multiples price-in a low probability of strong revenue growth resuming. The H1 release discloses +37% revenue growth in the first six weeks of H2, and we note that this is without yet realising the benefit of new retail channels to begin in March. We examine the valuation in this report, and we conclude that there is substantial upside potential.