Is Eastman Kodak Company (KODK) now at an operational inflection point? It has been a long road back from digital photography disintermediation, but Eastman Kodak Company (KODK) is showing green shoots.
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Major balance sheet repair, stabilization in the print business, and new end markets like EV batteries and molecular reagents for pharma which look very intriguing definitely warrant a look. Is the market underestimating a company with nearly 80,000 patents?
In the latest quarter total revenues grew 18% YOY to $311 m. Importantly, print revenue grew 10% YOY to $195 m while the AMC (Advanced Materials and Chemicals) segment grew revenue 40% YOY to $105 m.
Print is experiencing a bit of a renaissance due to Gen Z interest in instant printed photos.
Gross Margin, a metric we monitor closely, grew 700 bps YOY to 26% thus helping to enable healthy Operational EBITDA (non-GAAP) growth to $36 m vs. $9 m in the prior year.
Assuming this kind of growth is sustainable, this yields a pro-forma Operational EBITDA annual run-rate of $144 m. With an Enterprise Value of about $731 m, one could argue the stock may be undervalued based on this assumption.
We have elected to stay on the sidelines at a Neutral for the moment, looking for consistent operational improvement as well as better FCF execution. FCF was slightly negative at about $1 m for the quarter.
The other stock worth surveilling is NeurAxis, Inc. (NRXS). Their neuromodulation products for difficult to treat GI health conditions appear to be gaining some traction and the company is investing aggressively to accelerate growth.
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With a Gross Margin of 85.9%, NeurAxis, Inc. (NRXS) screens very high on our Marx ratio (Gross Profit/Total Assets) ranking system. Selling price increased 28% YOY in the latest quarter so pricing power is evident and health insurance coverage for its products has momentum.
Revenue more than doubled in the latest quarter to $1.9 m vs. $.9 m in the prior year quarter, but operating loss widened to $2.1 million from $1.7 million. The market has seemed to reward the sales growth in the past, but the stock has been pulling in of late, looking for a stable resting place.
The stock currently trades at about 12x TTM EV/Sales so not for the feint of heart. We remain on the sidelines at a Neutral based primarily on valuation, lack of operating leverage, and share dilution from its ATM.
But nonetheless, the sales trajectory will be key to watch as well as the level of sales multiple.
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