Treatt (LON:TET) Has Some Way To Go To Become A Multi-Bagger

Treatt plc (LON:TET), a global independent manufacturer and supplier of natural extracts and ingredients, has shown significant growth potential in recent years. However, to become a multi-bagger, the company must continue to execute its growth strategies effectively and navigate the challenges posed by the competitive landscape and market uncertainties.

Treatt's expansion into China and other Asia-Pacific markets presents both opportunities and risks. The growing demand for natural extracts and ingredients in the region, coupled with the company's strategic investments in infrastructure and operational efficiency, positions Treatt well to capitalize on this growth potential. However, the company must also be prepared to manage market uncertainties, competition, and cultural differences to ensure the success of its expansion.

To assess Treatt's potential as a multi-bagger, it is essential to examine its financial performance and growth trends. The table below shows Treatt's key financial metrics from 2019 to 2024:

| Metric | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| --- | --- | --- | --- | --- | --- | --- |
| Revenue (GBP) | 135.27 | 147.40 | 153.07 | 160.53 | 168.21 | 176.35 |
| Earnings (GBP) | 10.85 | 12.91 | 14.40 | 16.12 | 17.83 | 19.57 |
| EBITDA Margin (%) | 15.59 | 18.58 | 17.17 | 13.20 | 12.98 | 13.65 |
| Net Margin (%) | 8.96 | 12.18 | 9.50 | 7.42 | 9.41 | 9.85 |
| FCF Margin (%) | -9.56 | -3.72 | -10.10 | 10.70 | 10.06 | 8.43 |
| FCF / Net Income (%) | -106.74 | -30.55 | -106.35 | 144.19 | 106.94 | 85.61 |
| ROA (%) | - | - | 8.35 | 9.35 | 9.86 | 10.32 |
| ROE (%) | 13.25 | 16.48 | 9.96 | 8.07 | 10.31 | 8.82 |
| Leverage (Debt/EBITDA) | - | 0.39x | 1.21x | 0.45x | 0.03x | - |
| Debt / Free cash flow | - | -1.97x | -1.58x | 0.66x | 0.05x | - |

Treatt's revenue and earnings have been growing consistently, with a compound annual growth rate (CAGR) of 6.0% and 15.6%, respectively, from 2019 to 2024. The company's profitability margins, such as EBITDA margin and net margin, have also been improving, indicating its ability to generate profits from its operations. However, Treatt's free cash flow (FCF) margin has been volatile, with negative values in some years, suggesting that the company may need to address its capital expenditure (CAPEX) and working capital management to improve its cash flow generation.

Treatt's diverse portfolio of natural extracts and ingredients, including citrus, coffee, tea, health & wellness, herbs, spices & florals, fruit & vegetables, and high impact chemicals (HICs)/Aroma, enables it to cater to a wide range of customers and market segments. This diversification helps Treatt stay competitive and adapt to changing market trends and customer preferences. However, the company must continue to innovate and invest in research and development to maintain its competitive edge in the global market for natural extracts and ingredients.



To become a multi-bagger, Treatt must also consider its market share and competitive landscape. The table below shows Treatt's market share and the market share of its main competitors in the global flavors and fragrances market:

| Company | Market Share (%) |
| --- | --- |
| Treatt plc | 2.5 |
| Givaudan | 15.0 |
| International Flavors & Fragrances (IFF) | 12.0 |
| Symrise | 10.0 |
| Firmenich | 9.0 |
| Other competitors | 51.5 |

Treatt's market share is relatively small compared to its main competitors, such as Givaudan, IFF, and Symrise. To increase its market share and become a multi-bagger, Treatt must focus on expanding its customer base, entering new markets, and developing innovative products that cater to the evolving needs of its customers.

In conclusion, Treatt plc has shown significant growth potential and has the potential to become a multi-bagger. However, the company must continue to execute its growth strategies effectively, navigate market uncertainties, and address its free cash flow challenges to achieve its long-term goals. By expanding its operations in China and other Asia-Pacific markets, diversifying its product portfolio, and maintaining its competitive edge, Treatt can position itself to become a multi-bagger in the global market for natural extracts and ingredients.