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Neighbourly Pharmacy: Should You Buy the Dip?

The S&P/TSX Capped Health Care Index was down 4.9% in mid-afternoon trading on September 29. Today, I want to look at Neighbourly Pharmacy (TSX:NBLY), a Toronto-based company that owns and operates a chain of retail pharmacies in Canada. Its shares have plunged 49% in the year-to-date period. That has pushed the stock into negative territory compared to the same time in 2021.

This company unveiled its first quarter fiscal 2023 results on August 2. It delivered same-store sales growth of 1.8%. Same store sales increased 2.6% excluding clinic format pharmacies. Meanwhile, revenue climbed 34% from the previous year to $29.0 million. Moreover, adjusted EBITDA increased 11% to $11.3 million. Neighbourly was bolstered by improved profitability of its retail pharmacies. It has engaged in an aggressive acquisition campaign in recent years.

Neighbourly’s network of pharmacies sat at 275 at the end of the first quarter of fiscal 2023. The company reported adjusted earnings per share of $0.09 in Q1 FY2023 – up from $0.07 in the previous year. Investors should feel good about Neighbourly’s business health going forward. The COVID-19 pandemic drove away non-urgent doctor trips, which in turn has led to a temporary dip in prescriptions. Despite that, Neighbourly’s retail stable put together a very solid performance.

Shares of this health care retailer are trading in favourable value territory compared to its industry peers. Meanwhile, it offers a monthly dividend of $0.045 per share. That represents a modest 0.9% yield. This is a stock that I’m looking to snatch up on the dip in the beginning of the fall season.