Health-care stock Jamieson Wellness Inc (TSX:JWEL) has been one of the hottest buys on the TSX this year, up 45% year to date. With vitamins in demand as consumers are stockpiling on essentials during the COVID-19 pandemic, Jamieson’s benefited from the extra sales, which rose 16.5% year over year in the company’s first quarter.
Jamieson releases its second-quarter results, which will go up until the end of June, on August 12 in what could be another strong performance for the company.
The only downside to buying the stock right now may be its high valuation. Currently, shares of Jamieson are trading at more than 40 times earnings and five times their book value.
Those are high multiples for a company that normally doesn’t see a whole lot of growth. In 2019, its sales rose by a modest 7.8% and the year before that they were up 6.3%. The boost the company’s seen this year may not be sustainable once the pandemic’s over and things go back to normal.
And that’s why despite Jamieson’s strong performance in 2020, it may not make for a good long-term buy, especially given its high valuation. It’s a good stock to hang on to while the coronavirus pandemic’s continue to wreak havoc on the economy but once that ends that may no longer be the case.
For dividend investors, it’s also not a terribly enticing stock to own given that Jamieson pays a fairly modest yield of just 1.2%.
Overall, investors are better off looking elsewhere as there are higher yielding stocks out there at much cheaper valuations with potentially more long-term growth than Jamieson.
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