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Reasons to Retain EYE Stock in Your Portfolio for Now

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National Vision Holdings, Inc.’s (EYE - Free Report) growth is backed by the consistent market expansion of the Owned and Host segment. The company’s strategic progress in terms of expanding exam capacity, recruitment and retention efforts and remote exam initiatives is highly encouraging. However, weak solvency and an ailing capital structure are concerning. Mounting expenses due to slow economic conditions also add to the worry.

In the past year, this Zacks Rank #3 (Hold) company’s shares have lost 33.4% against the industry’s 20.4% growth and the S&P 500 composite’s 27.5% increase.

The leading optical retailer has a market capitalization of $865 million. The company projects long-term estimated earnings growth of 19.4% compared with the industry’s 15.9%. National Vision beat on earnings in each of the trailing four quarters, delivering an average surprise of 96.23%.

Let’s delve deeper.

Key Upsides of EYE

Owned & Host Gaining Market Share: All four sub-segments within Owned and Host are consistently gaining market share, banking on several growth drivers. In line with this, America's Best brand is particularly driving revenues on the back of the ongoing strength in managed care and a notable improvement in comparable store sales from cash-pay customers.

In the second quarter of 2024, National Vision officially enabled nearly 600 stores across 28 states and reached a milestone when 500,000 remote exams were conducted and remote doctor productivity levels continued to improve. Additionally, the company opened 17 new stores and ended the second quarter with 1,216 stores.

Future Strategies Look Promising: National Vision plans to continue executing core growth initiatives and investing in strengthening competitive advantages.

In terms of store expansion, the company continues to see a sizable new opportunity for growth in the years ahead. National Vision aims to open another 65 to 70 stores in 2024. The company is raising its whitespace opportunity for its America’s Best brand by 350 stores. EYE continues with its efforts to help rightsize both its store and overall cost structure, including further digitization of stores and corporate offices, to improve efficiency and productivity.

In the second quarter of 2024, the company generated a cumulative operating cash flow of $75.4 million and invested $39.6 million in capital expenditures, primarily focused on new store openings and investments in technology.

Key Downsides of EYE

Solvency and Capital Structure: National Vision exited the second quarter with cash and cash equivalents of $180 million. This was quite low compared to the company’s total debt of $457 million at the end of the second quarter. In fact, the currently payable debt of $313 million too was higher than the current cash balance. This is not a good news in terms of EYE’s solvency position, particularly amid macroeconomic headwinds like global supply issues.

 

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Mounting Expenses: Over the past few years, global markets and economic conditions have been challenging, particularly in light of rising interest rates, historic inflation throughout 2023 and global conflict that have created continued economic uncertainty. The company expects this trend to continue through 2024 and beyond.

In the second quarter of 2024, SG&A expenditures were 45.2% of the total revenues and rose 3.8% year over year.

Estimate Trend

The Zacks Consensus Estimate for 2024 earnings per share (EPS) has remained constant at 50 cents in the past 30 days.

The Zacks Consensus Estimate for 2024 revenues is pegged at $1.82 billion, implying a 14.3% decline from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are TransMedix Group (TMDX - Free Report) , AxoGen (AXGN - Free Report) and Boston Scientific (BSX - Free Report) .

TransMedix Group’s earnings are expected to surge 255.8% in 2024. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%. Shares of the company have risen 171.3% in the past year compared with the industry’s 18.8% growth. TMDX sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AxoGen, sporting a Zacks Rank #2 (Buy) at present, has an earnings yield of 94.1% compared with the industry’s 12.3%. Shares of the company have risen 180% compared with the industry’s 18.8% growth over the past year.  AXGN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 96.46%.

Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 17.1% for 2024 compared with the industry’s 15.7%. In the past year, shares of BSX have risen 52.6% compared with the industry’s 19% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

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