By Michael Kim
READ THE FULL ETST RESEARCH REPORT
On 2/17/26, Earth Science Tech (OTC:ETST) reported F3Q26 earnings and filed the company’s 10-Q for the three months ended December 31, 2025. For the quarter, ETST reported net income of $0.9 million, or $0.003 per share, just shy of our $0.005 estimate. Relative to our model, a revenue shortfall and less favorable non-operating trends were partially offset by lower operating expenses.
Focusing on the top line, ETST generated $8.4 million of revenue in F3Q26, below our $10.0 million forecast, but up from $7.4 million for the year-ago quarter. Relative to our model, the variance was seemingly mostly a function of adverse seasonality as well as a temporary Active Pharmaceutical Ingredients (API) supply issues in India and China in November and December (which have subsequently been fully resolved). After factoring in cost of goods sold of $2.0 million, gross profit totaled $6.4 million for F3Q26, representing a gross margin of 76.3% compared to 69.2% for the prior-year quarter.
In aggregate, ETST’s operating expenses totaled $5.1 million for F3Q26, down from $6.1 million for F2Q26, and came in 17% below our $6.1 million forecast. Much of the favorable variance related to lower compensation, partially offset by higher general and administrative costs.
Turning to the balance sheet, assets totaled $8.1 million, including cash of $416,000 as of December 31, 2025. By comparison, assets totaled $5.7 million as of December 31, 2024, inclusive of $522,000 of cash on the balance sheet. Adjusted EBITDA totaled $1.2 million for F3Q26, up from just $300,000 for the year-ago quarter. Turning to share buybacks, management repurchased 1,143,000 and 3,703,296 shares of common stock during F3Q26 and the first three quarters of F2026, respectively, thereby reducing the number of outstanding shares by 3.6% over the last 12 months.
Our updated model calls for EPS to total $0.01 for fiscal year 2026 (ending March 31, 2026) followed by $0.03 in F2027, with further growth expected in F2028 and beyond as the business continues to scale and operating efficiency initiatives increasingly take hold. Our model updates included a slightly flatter revenue growth trajectory offset by more favorable margin assumptions.
Focusing on the top line, we project revenue growth to remain strong – $35.1 million in F2026 followed by $43.2 million in F2027, representing a year-over-year growth rate of 23%. Key growth drivers likely include rising sales at Peaks Curative, with an expanding fulfillment footprint assuming RXCompound wins incremental state licenses, building momentum at Mister Meds following the company’s commencement of operations, and the recent additions of Las Villas and DOConsultations.com.
Turning to valuation, we are leaving our DCF-derived price target unchanged at $1.00. We see meaningful upside potential from current levels, as ETST continues to trade at what we believe to be an unsustainably low valuation despite the company’s unique business model, compelling growth track record, improving profitability, and strong balance sheet. In our minds, much of the ETST’s steep discount can be attributed to a lack of awareness across the investment community, particularly considering the stock’s OTC listing, more limited liquidity, and undersized market cap. That said, we look for a considerable upward revaluation for the stock, as awareness and appreciation of the company’s business model, growth prospects, competitive positioning, profitability, and valuation disconnect increasingly take hold.
Following our review of F3Q26 results, we highlight the following key takeaways:
1. Accelerating revenue growth: Going forward, we look for a number of powerful catalysts to increasingly drive accelerating revenue growth across a number of ETST’s subsidiaries. At a high level, ongoing initiatives to broaden product and distribution capabilities across businesses likely drive more sustainable revenue growth, with management recently stepping up inventory investments ahead of accelerating sales volumes. More specifically, Peaks, ETST’s telemedicine platform, generated $843 million of sales in F3Q26 (translating into a $3.4 million annualized run-rate), up 45% on a sequential-quarter basis and nearly 670% versus the prior-year quarter. Looking ahead, we forecast continued growth in sales, particularly as fulfillment capabilities expand. Importantly, related revenues carry high incremental margins, with the underlying mix skewing more in favor of recurring prescriptions (currently around 40% to 45%) as opposed to one-time sales. Next, RXCompound and Mister Meds continue to build out complementary distribution footprints, with 12 additional state licenses pending. Assuming related applications are approved (potentially in the next few months), broader geographic reach meaningfully expands ETST’s Total Addressable Market (TAM) and revenue profile. Finally, MyOnlineConsultation.com (MOC) – a referral platform to facilitate consultations for compounded prescription medications – is scheduled to launch in the next few months, with support from Villas Health’s doctor network and RxCompound’s fulfillment capabilities.
2. Prioritizing corporate governance and capital efficiency: In conjunction with F3Q26 results, management announced a series of initiatives designed to institutionalize the business, attract new investors, and drive long-term value creation. From a corporate governance perspective, senior executives and the Board of Directors remain focused on enhancing shareholder engagement and transparency. Indeed, shareholders are set to vote on the potential retirement of ETST’s Series B Preferred Stock, which would seemingly allow certain institutional investors to take positions in the stock (though a shift in capital structure combined with compensation adjustments may trigger senior management turnover). Furthermore, the Board continues to contemplate uplisting the stock to the OTCQB, OTCQX, or a senior exchange to enhance liquidity (though any potential transition would likely come with a step up in compliance costs/requirements). Next, the management team continues to explore the divestiture of non-core assets (likely Magnefuse despite the company’s recent positive inflection in cash flows), as well as consolidating subsidiaries to further optimize the portfolio and enhance operating efficiencies. Finally, in addition to recently-voided employment contracts and lower Board compensation rates (generating ~$1.4 million in annualized cost savings for F4Q26 and potentially beyond), shareholders are set for a “say on pay” advisory vote to approve or disapprove of the compensation for top executives, with the goal of better aligning management incentives with shareholder interests.
3. Rising margins/earnings power: ETST’s operating margin expanded from 3.1% in F3Q25 to 16.0% in F3Q26, with further expansion to come, we believe. Beyond strong revenue growth, key drivers are likely to include elevated gross margins at RXCompound and Peaks Curative, compensation relief (assuming shareholder approval), and ETST’s holding company structure enables subsidiaries to leverage centralized corporate functions, including information technology, marketing, finance/accounting, and legal, amongst others, thereby streamlining expenses across the portfolio. In addition, assuming an ongoing sales mix shift in favor of non-sterile compounding medications (carrying higher gross margins) and away from weight-loss products, given rising competition, regulatory uncertainty, and supply challenges, suggests further upside in gross margins. From a cash flow perspective, ETST generated $1.2 million of positive cash from operations through the first three quarters of F2026, with four subsidiaries currently generating positive cash flows compared to just one in F2024.
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