I haven’t owned ETON for very long but I thought it had a great report so I figured I’d do a brief write up. @Ryshab brought it to the board so I’m curious his thoughts and others. Here is @ryshab’s introduction with an overview of the company: Introducing Eton Pharmaceuticals (Ticker: ETON)
Revenue growth accelerated to 118% YoY up from 109% and 117% the last two quarters
Gross margin of 45% was due to a one-time charge in the quarter. Management expects to return to 70% GM next quarter
Non-GAAP Net Income was $1.5M. Flat QoQ but affected by the above charge
Launching a new product, “ET-600” in Q1 2026
They seem to be scaling all their existing products, and have a few lined up to continue growth for the foreseeable future.
The market sold it off, I assume due to the EPS miss which was due to the 1 time charge. I added to my position and have plans to add more once more of my companies report.
I liked the report. As you know, I have a 8% allocation on ETON.
There are a few things that re-iterated my conviction in this investment:
As you mentioned, their key product lines are all showing good growth
They continue to emphasize operational efficiency, highlighted by 75%+ margins over long term and continuous FCF margin improvement. Current FCF margin is already elite level (last 2 quarters were 42 and 52%)
They have analysts calling for 30%+ growth for next 3 years
They have gotten good at playing this analyst game. Two evidences. One, this was their 6 beat in a row. Two, they have raised analyst guide by a modest 20% over the last year.
They are still relatively cheap - given they will grow 30%+ over the next 3 years (if they execute) and they most likely are headed to 40%+ fcf margin.
Everything being equal, you are looking at 30% returns a year (aka revenue growth related). But I believe it should be much more given their key KPIs are improving significantly.
Here is the KPI related quote from their CEO Sean on the call
”In addition to delivering on the top line, we remain focused on profitability, and I am pleased to share that we generated $12 million of cash from operations in the quarter. Eton is committed to controlling our expenses, and I am proud to report that even though our revenue is growing rapidly, we were able to reduce our adjusted SG&A expense sequentially from the second quarter to the third quarter. Continued control of our operating expenses in tandem with strong revenue growth will position us for significant margin expansion.”
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and here is another one:
”So we expect to deliver even stronger EBITDA in the quarters ahead.”*