Is It Time To Consider Buying Supreme Plc (LON:SUP)?

Supreme Plc (LON:SUP), a leading manufacturer and distributor of batteries, lighting, vaping, and wellness products, has been making waves in the consumer staples sector. With a strong financial performance, strategic expansion, and a commitment to returning value to shareholders, investors may be wondering if it's time to consider buying Supreme Plc. This article will explore the key drivers behind Supreme Plc's recent stock price performance, its revenue and profit growth compared to its peers, and the potential risks and challenges facing the company in the near and long-term.



Key Drivers Behind Supreme Plc's Recent Stock Price Performance

1. Strong Financial Performance: Supreme Plc has reported solid financial results, with organic revenue and profits growing in the first half of the fiscal year 2024. The company's profit before tax increased to £30.12 million in 2024, up from £14.44 million in 2023, representing a significant growth of 108.89%. Additionally, the adjusted EPS grew by 77% to 20.90p in 2024, compared to 11.80p in 2023.
2. Dividend Growth: Supreme Plc has consistently increased its dividends over the years. The total annual dividends paid have grown from 3.00p in 2024 to 6.00p in 2022, reflecting the company's commitment to returning value to shareholders. This dividend growth may have contributed to the stock's price appreciation.
3. Expansion into New Markets and Product Lines: Supreme Plc has expanded its product offerings and entered new markets, such as vaping and wellness products. This strategic move has allowed the company to tap into new revenue streams and diversify its business, potentially driving stock price growth.
4. Partnerships with Top Brands: Supreme Plc partners with top brands in the household products industry, offering high-margin products. These partnerships can enhance the company's reputation and increase its market share, contributing to its stock price performance.
5. Increased Investor Interest: The company's strong financial performance, dividend growth, and strategic expansion may have attracted more investors, leading to increased demand for the stock and, consequently, a higher stock price.



Revenue and Profit Growth Compared to Peers in the Consumer Staples Sector

Based on the information provided, Supreme Plc has experienced significant revenue and profit growth compared to its peers in the consumer staples sector. Here's a comparison using specific data points from the materials:

1. Revenue Growth:
* Supreme Plc's revenue grew from £155.61 million in 2023 to £221.25 million in 2024, representing a 42.4% increase.
* In contrast, the average revenue growth of Supreme Plc's peers in the consumer staples sector is estimated to be around 20% (based on the average growth rate of the companies listed in the materials).
2. Profit Growth:
* Supreme Plc's profit before tax grew from £14.44 million in 2023 to £30.12 million in 2024, representing a 108.3% increase.
* The average profit growth of Supreme Plc's peers in the consumer staples sector is estimated to be around 30% (based on the average growth rate of the companies listed in the materials).
3. EPS Growth:
* Supreme Plc's adjusted EPS grew from 11.80p in 2023 to 20.90p in 2024, representing a 77% increase.
* The average EPS growth of Supreme Plc's peers in the consumer staples sector is estimated to be around 20% (based on the average growth rate of the companies listed in the materials).

These comparisons demonstrate that Supreme Plc has experienced significantly higher revenue and profit growth compared to its peers in the consumer staples sector. This growth can be attributed to the company's strong performance in its core businesses, such as batteries, lighting, vaping, and wellness products.



Potential Risks and Challenges Facing Supreme Plc in the Near and Long-Term

1. Market Volatility and Economic Downturns: The stock market is volatile, and economic downturns can negatively impact the company's share price and overall performance. For instance, during the 2024 market downturn, SUP's share price fluctuated significantly, reaching a low of 90.50 in September 2023 (Source: Share Prices). Economic downturns can also lead to reduced consumer spending, which may affect the demand for SUP's products, particularly in the consumer staples sector.
2. Competition: SUP operates in a competitive market, with other companies vying for market share. Some of its competitors include Albaad Massuot Yitzhak Ltd. (ALBA), Candles Scandinavia AB (CANDLE), and Culti Milano (CULT) (Source: Related Companies & Peer Group). Increased competition can lead to price wars, reduced profit margins, and market share loss for SUP.
3. Regulatory Risks: Changes in regulations, such as those related to product safety, environmental standards, or trade agreements, can impact SUP's operations and profitability. For example, stricter regulations on vaping products could negatively affect SUP's vaping product sales.
4. Supply Chain Disruptions: Disruptions in the supply chain, such as those caused by geopolitical instability, natural disasters, or pandemics, can lead to increased production costs, reduced product availability, and potential loss of market share. The COVID-19 pandemic, for instance, has highlighted the risks associated with global supply chain disruptions.
5. Dependence on Key Customers and Brands: SUP's business model relies on partnerships with top brands, and a significant portion of its revenue comes from a relatively small number of customers. Losing key customers or facing reduced demand from these customers could negatively impact SUP's financial performance.
6. Technological Changes and Disruptions: Rapid technological advancements and disruptions in the market can lead to changes in consumer preferences and demand for SUP's products. For example, the shift towards sustainable and eco-friendly products could impact the demand for SUP's batteries and lighting products.
7. Geopolitical Risks: Geopolitical instability, trade wars, and political risks in the regions where SUP operates can negatively impact its business operations and financial performance.
8. Currency Fluctuations: As an international company, SUP is exposed to currency fluctuations, which can affect its revenue and profitability. For instance, a strengthening of the British Pound could make SUP's products more expensive for international customers, potentially reducing demand.

In conclusion, Supreme Plc's recent stock price performance can be attributed to its strong financial performance, dividend growth, strategic expansion, partnerships with top brands, and increased investor interest. However, the company faces potential risks and challenges in the near and long-term, such as market volatility, competition, regulatory risks, supply chain disruptions, dependence on key customers and brands, technological changes, geopolitical risks, and currency fluctuations. Investors should carefully consider these factors when deciding whether to buy Supreme Plc shares.