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K-Bro Linen (TSE:KBL)
:KBL
Canadian Market

K-Bro Linen (KBL) AI Stock Analysis

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K-Bro Linen

(TSX:KBL)

72Outperform
K-Bro Linen exhibits a solid overall performance driven by strong financials and positive earnings call outcomes. The company's stable revenue growth and robust cash flows are complemented by strategic acquisitions enhancing growth prospects. Technical analysis and valuation metrics suggest a neutral stance, while increased costs and tax implications present areas of caution.

K-Bro Linen (KBL) vs. S&P 500 (SPY)

K-Bro Linen Business Overview & Revenue Model

Company DescriptionK-Bro Linen Inc is a healthcare and hospitality laundry and linen processor in Canada. It operates around 15 facilities in major cities across Canada, and two distribution centers, providing management services and laundry processing of hospitality, healthcare, and specialty linens. The company provides vital products and services that help people heal, travel, live, and play. It is helping hospitals and extended care centers care for the young, old, and vulnerable in environmentally responsible ways. It operates through two divisions such as the Canadian division and the UK division.
How the Company Makes MoneyK-Bro Linen makes money through its core business of providing linen and laundry services to the healthcare and hospitality sectors. The company's revenue model is based on long-term contracts with hospitals, healthcare facilities, and hotels, which provide a steady and predictable income stream. These contracts typically involve the regular collection, cleaning, and delivery of linens and garments, for which K-Bro charges service fees. Additional revenue is generated through supplementary services such as inventory management and specialized cleaning processes. The company may also engage in partnerships with healthcare systems or hospitality chains to expand its service offerings and enhance its market presence.

K-Bro Linen Financial Statement Overview

Summary
K-Bro Linen exhibits a strong financial position with consistent revenue growth, solid cash flow generation, and moderate profitability. While the company maintains operational efficiency, there's room to enhance net profitability and monitor debt levels to ensure long-term financial stability. Overall, the financial statements present a promising outlook with stable growth prospects.
Income Statement
75
Positive
K-Bro Linen has shown strong revenue growth with a TTM increase of about 12.40% from the previous year. The company maintains a healthy gross profit margin of approximately 38.81% in the TTM, indicating efficient control over production costs. However, the net profit margin is relatively modest at 5.19%, suggesting room for improvement in managing non-operating expenses. Steady EBIT and EBITDA margins at 8.95% and 18.11% respectively reflect stable operational efficiency.
Balance Sheet
70
Positive
The balance sheet presents a debt-to-equity ratio of 1.02, which is relatively high but manageable, indicating a balanced use of debt and equity. The equity ratio stands at 41.66%, showing a substantial portion of assets funded by equity. Return on Equity is decent at 9.94%, suggesting moderate profitability relative to equity. The financial leverage appears controlled but warrants monitoring to avoid increased financial risk.
Cash Flow
80
Positive
The company demonstrates robust cash flow health with an operating cash flow to net income ratio of 2.50, indicating strong cash earnings. Free cash flow growth is positive, with a slight increase to $30.73 million, highlighting effective cash management. Free cash flow to net income ratio at 1.64 further supports the company's capability to generate cash in excess of capital expenditures.
Breakdown
TTMDec 2023Dec 2022Dec 2021Dec 2020Dec 2019
Income StatementTotal Revenue
360.63M320.88M276.62M223.99M196.59M252.41M
Gross Profit
140.00M114.48M234.35M186.99M164.82M216.69M
EBIT
32.28M28.49M9.27M15.44M15.54M19.17M
EBITDA
65.32M56.45M36.49M42.79M38.24M47.57M
Net Income Common Stockholders
18.72M17.61M3.91M8.69M3.78M10.91M
Balance SheetCash, Cash Equivalents and Short-Term Investments
2.83M5.86M2.64M1.11M2.42M5.30M
Total Assets
322.23M364.72M325.76M332.52M323.81M352.06M
Total Debt
70.20M123.55M98.82M94.91M86.66M109.32M
Net Debt
67.38M117.69M96.19M93.80M84.24M104.02M
Total Liabilities
123.57M190.28M149.22M146.12M134.31M156.01M
Stockholders Equity
198.66M174.43M176.54M186.40M189.50M196.05M
Cash FlowFree Cash Flow
30.73M29.02M14.67M21.38M37.98M29.54M
Operating Cash Flow
46.76M41.01M26.13M31.88M42.40M43.92M
Investing Cash Flow
-81.95M-34.26M-11.43M-10.49M-4.41M-14.33M
Financing Cash Flow
50.34M-3.72M-13.11M-22.69M-40.83M-27.10M

K-Bro Linen Technical Analysis

Technical Analysis Sentiment
Negative
Last Price32.03
Price Trends
50DMA
35.51
Negative
100DMA
35.85
Negative
200DMA
34.87
Negative
Market Momentum
MACD
-0.93
Positive
RSI
25.91
Positive
STOCH
8.35
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:KBL, the sentiment is Negative. The current price of 32.03 is below the 20-day moving average (MA) of 33.97, below the 50-day MA of 35.51, and below the 200-day MA of 34.87, indicating a bearish trend. The MACD of -0.93 indicates Positive momentum. The RSI at 25.91 is Positive, neither overbought nor oversold. The STOCH value of 8.35 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:KBL.

K-Bro Linen Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSKBL
72
Outperform
C$337.46M17.9110.26%3.75%16.67%40.01%
TSSIS
66
Neutral
C$1.18B24.078.63%3.21%3.68%19.78%
61
Neutral
$8.22B13.010.73%3.10%3.88%-16.90%
TSHLS
52
Neutral
C$127.17M-23.20%-8.80%26.77%
TSAGT
45
Neutral
-10.69%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:KBL
K-Bro Linen
32.25
-0.21
-0.65%
CLS
Celestica
91.58
47.61
108.28%
BHC
Bausch Health Companies
7.15
-2.05
-22.28%
TSE:SIS
Savaria
16.51
0.43
2.67%
TSE:HLS
HLS Therapeutics Inc
4.00
0.00
0.00%
TSE:AGT
Applied Graphite Technologies Corporation
0.13
-0.03
-18.75%

K-Bro Linen Earnings Call Summary

Earnings Call Date: Nov 13, 2024 | % Change Since: -5.60% | Next Earnings Date: Mar 20, 2025
Earnings Call Sentiment Positive
The earnings call reflected strong financial performance with significant revenue and EBITDA growth driven by acquisitions and strong hospitality sector performance. Despite the positive outlook and strategic positioning for future growth, there were concerns about increased costs, especially relating to corporate expenses and new employer taxes in the U.K.
Highlights
Record Third Quarter Revenue
K-Bro Linen Systems Inc. reported Q3 2024 revenue of $104 million, a 20% increase compared to Q3 2023.
Hospitality Revenue Growth
Hospitality revenue increased by 37% in Q3 2024, following acquisitions and implemented price increases.
Adjusted EBITDA Improvement
Consolidated adjusted EBITDA increased by 27.2% to $23 million in Q3 2024 compared to $18.1 million in 2023.
Strong U.K. Division Performance
The U.K. division's adjusted EBITDA margin increased to 24.3% in Q3 2024 from 20.3% in 2023, driven by the acquisition of Shortridge and cost efficiencies.
Positive Outlook for Business
K-Bro Linen Systems Inc. sees a positive outlook with steady volume trends in Healthcare and Hospitality, and remains well-positioned for future M&A.
Lowlights
Increased Corporate and Transaction Costs
Corporate costs increased by $0.9 million in Q3 2024 and by $4.2 million on a year-to-date basis, mainly due to transaction costs and consulting fee expenditures.
Higher Delivery and Utility Costs
Delivery costs increased by $2.2 million, and utility costs increased by $0.8 million in Q3 2024 compared to the previous year.
Employer Tax Increase in the U.K.
A sizable increase in employer tax in the U.K. is expected to impact margins in 2025, offsetting some gains from reduced natural gas costs.
Company Guidance
During K-Bro Linen Systems Inc.'s Q3 2024 earnings call, the company reported impressive financial metrics, highlighting a 20% increase in consolidated revenue compared to Q3 2023. This growth was driven by a 6% rise in healthcare revenue and a substantial 37% increase in hospitality revenue. Adjusted EBITDA for the quarter was $23 million, reflecting a 27.2% increase from the previous year, with the adjusted EBITDA margin improving to 22% from 20.8%. The company's net earnings grew by 21.9% to $8.1 million, and net earnings as a percentage of revenue slightly increased to 7.8%. K-Bro also reported a strong balance sheet with a debt-to-EBITDA ratio, excluding leases, of just under 2.5x. Additionally, the company noted its active pursuit of acquisitions, contributing to its growth strategy, and expressed optimism about its organic growth prospects and future M&A opportunities.

K-Bro Linen Corporate Events

K-Bro Linen Declares January 2025 Dividend
Jan 15, 2025

K-Bro Linen Inc. has declared a dividend of 10.00 cents CDN per common share for January 2025, reflecting its regular policy of monthly dividends to shareholders of record on the last business day of the month. This announcement underscores K-Bro’s stable financial practices and continues to support its stakeholders with predictable returns, potentially enhancing its position within the linen processing industry.

K-Bro Linen Announces December 2024 Dividend
Dec 13, 2024

K-Bro Linen Inc., Canada’s largest operator of laundry and linen processing facilities, has announced a December dividend of 10 cents per share to be paid in January. The company provides linen services to healthcare, hospitality, and other commercial sectors across Canada and has additional operations in Scotland and the North East of England.

K-Bro Linen Reports Strong Q3 Revenue Growth
Nov 13, 2024

K-Bro Linen Inc. reported a robust 20.2% increase in Q3 2024 revenue, driven by notable growth in both its healthcare and hospitality segments. The company’s adjusted EBITDA saw a significant rise, highlighting the positive impact of recent acquisitions and stabilized market conditions. Additionally, K-Bro’s dividend declaration and expanded credit facilities underscore its financial confidence and strategic growth initiatives.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.