Happy Belly Food Group (CNSX:HBFG): Valuation Considerations After High-Profile Heal Wellness Expansion at Eaton Centre

Happy Belly Food Group (CNSX:HBFG) just made headlines with its new franchise agreement and lease for Heal Wellness at Toronto's Eaton Centre, one of the most visited retail locations in Canada. This step is an important milestone in the company’s national expansion strategy.

See our latest analysis for Happy Belly Food Group.

Momentum has been picking up for Happy Belly Food Group, with the stock’s 30-day share price return of 22.5% and a remarkable 59.4% return over the last 90 days. Zooming out, its one-year total shareholder return stands at an impressive 186%, and even longer-term holders have seen gains of nearly 1,778% over three years. This shows strong follow-through behind headline-grabbing deals like the new Heal Wellness franchise at Eaton Centre.

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With growth rates and headline deals like these, is Happy Belly Food Group still trading at a discount? Or have investors already priced in its next phase of rapid expansion?

Price-to-Sales of 15.5x: Is it justified?

Compared to its last close price of CA$1.69, Happy Belly Food Group carries a substantial price-to-sales (P/S) ratio of 15.5. This places it well above both peer and industry benchmarks, implying the market is pricing in significant expectations for future growth or profitability.

The price-to-sales multiple measures how much investors are willing to pay for each dollar of a company's revenue. For high-growth companies, a higher P/S can sometimes be justified by rapid expansion or a path to future profitability. However, it also raises the stakes if those outcomes do not materialize.

Happy Belly's P/S ratio of 15.5 is notably above the peer average of 8.3 and the North American Healthcare Services industry average of 4.3. In addition, it exceeds an estimated fair P/S ratio of 11.7, suggesting the current market price includes a premium above rational benchmarks. The market could shift toward this fair level if growth expectations do not hold up.

Explore the SWS fair ratio for Happy Belly Food Group

Result: Price-to-Sales of 15.5 (OVERVALUED)

However, slower revenue growth or sustained net losses could temper investor enthusiasm and lead to a revaluation of the company’s premium valuation.

Find out about the key risks to this Happy Belly Food Group narrative.

Another View: Discounted Cash Flow Model

Shifting to the SWS DCF model, a different perspective emerges. According to this approach, Happy Belly Food Group is actually trading at a 52.6% discount to its estimated fair value of CA$3.56 per share. This signals potential undervaluation even while traditional multiples point to a premium price. Could the market be missing the long-term growth story here?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Happy Belly Food Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Happy Belly Food Group Narrative

If you think there’s more to the story or want to dive into the numbers yourself, it only takes a few minutes to build your own view. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Happy Belly Food Group.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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