Modern Oral And Hemp Trends Will Capture Expanding Markets

Key Takeaways

• Rising sales in modern oral and hemp-based products, plus direct-to-consumer expansion, are fueling market share gains and revenue growth across new and premium categories.
  
• Shifts toward premium brands, operational efficiencies, and supply chain investments are strengthening profit margins and cash generation despite legacy segment headwinds.
  
• Dependence on Modern Oral growth, regulatory risks, aggressive competition, supply chain exposure, and shifting consumer trends threaten margins, revenue stability, and long-term profitability.

Catalysts

Manufactures, markets, and distributes branded consumer products in the United States and Canada.

• Strong growth in the Modern Oral nicotine pouch segment, with sales growing nearly 8x year-over-year and now accounting for 26% of total revenue, positions TPB to capture significant market share in a category projected to reach $10 billion by decade's end; this will drive long-term revenue and margin expansion as the modern oral segment scales and premiumizes.
  
• The expanding route-to-market strategy, including a major increase in sales force headcount and the rollout of leading DTC brands like ALP into brick-and-mortar retail, leverages shifts in consumer purchasing to alternative channels, supporting broader distribution, incremental revenue, and improved operational efficiency.
  
• Product innovation in hemp-based accessories and premium-branded offerings (such as new Zig-Zag cones and hemp launches) taps into the growing legalization and normalization of cannabis and hemp products, opening access to new, high-growth adjacent markets that further diversify and lift overall revenue.
  
• The company's ability to grow its premium brands in high-margin niches (e.g., Stoker's MST and Zig-Zag) while maintaining strong customer loyalty and executing pricing actions, even as legacy segments decline, underpins stable or improving net margins and cash generation through industry transitions.
  
• Ongoing supply chain optimizations, focused investment in U.S. manufacturing to mitigate tariff risks, and continued migration of volume to higher-margin segments are set to structurally enhance the company's gross margin profile, supporting sustained EBITDA and earnings growth.

Turning Point Brands Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Turning Point Brands's revenue will grow by 22.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.6% today to 13.5% in 3 years time.
• Analysts expect earnings to reach $100.8 million (and earnings per share of $4.37) by about September 2028, up from $51.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.4x on those 2028 earnings, down from 35.1x today. This future PE is lower than the current PE for the US Tobacco industry at 33.8x.
• Analysts expect the number of shares outstanding to grow by 1.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.72%, as per the Simply Wall St company report.

Turning Point Brands Future Earnings Per Share Growth

Risks

• The company's accelerated investments in sales force expansion, marketing, and slotting fees to drive Modern Oral growth introduce execution risk, higher SG&A spend, and potential pressure on net margins if target revenue growth does not materialize as anticipated.
  
• Heavy reliance on Modern Oral nicotine pouches (now 26% of revenue) exposes TPB to the risk of adverse regulatory changes, increased taxation, or outright flavor bans that could abruptly contract the segment and result in significant volatility or drops in future revenues and earnings.
  
• The category's highly competitive promotional environment, with larger players engaging in aggressive discounting to build share, may force TPB to either sacrifice pricing (impacting gross margin) or risk losing market share, resulting in pressure on both revenue and net margins long-term.
  
• Ongoing tariff impacts and exposure to overseas manufacturing (specifically India for white pouch production) pose supply chain risk, possible cost inflation, and could compel further expense in reshoring production, weighing on both gross margin and capital expenditure requirements.
  
• Secular trends, including increasing public health campaigns, generational aversion to nicotine products, and persistent regulatory scrutiny, may limit customer acquisition, shrink the addressable market, and put downward pressure on long-term revenues and earning power.

Valuation

• The analysts have a consensus price target of $107.75 for Turning Point Brands based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $745.7 million, earnings will come to $100.8 million, and it would be trading on a PE ratio of 25.4x, assuming you use a discount rate of 7.7%.
• Given the current share price of $99.51, the analyst price target of $107.75 is 7.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.