By Michael Kim
READ THE FULL ETST RESEARCH REPORT
Post-market close on 8/8/25, Earth Science Tech (OTC:ETST) reported F1Q26 (Jun) earnings and filed the company’s 10-Q for the three months ended June 30, 2025. For the quarter, ETST reported net income of $0.5 million, or $0.002 per share, or slightly below our $0.004 estimate. Relative to our model, a revenue shortfall was partially offset by lower expenses and more favorable non-operating income.
Focusing on the top line, ETST generated $8.8 million of revenue in F1Q26, or meaningfully below our $10.4 million forecast, but up from $8.6 million for the year-ago quarter. Relative to our model, the variance was seemingly mostly a function of only partial quarter contributions from Mister Meds, Las Villas Health, and DOConsultations. That said, much of the year-over-year growth can be attributed to accelerating product sales at Peaks combined with the commencement of revenue generated across Villas Health, DOConsultations, Mister Meds, MOC Teledoc, and Magnefuse, partially offset by a 7% decline in pharmaceutical products sales at RXCompound. After factoring in cost of goods sold of $2.7 million, gross profit totaled $6.1 million for F1Q26, representing a gross margin of 69.5% compared to 74.8% for the prior-year quarter. While overall volumes continued to trend higher (reflecting RXCompound’s fulfillment and execution competitive advantages), the industry dealt with stepped-up pricing pressure from Active Pharmaceutical Ingredient (API) suppliers, given escalating geopolitical uncertainty during the quarter.
In aggregate, ETST’s operating expenses totaled $5.8 million for F1Q26 compared to $5.3 million for F1Q25, and came in 7.6% below our $6.3 million forecast (despite some non-recurring costs related to recent acquisitions). Much of the favorable variance related to lower compensation and general & administrative expenses.
Our updated model calls for EPS to total $0.01 for fiscal year 2026 (ending March 31, 2026) followed by $0.04 in F2027, with further growth expected in F2028 and beyond as the business continues to scale. Our EPS revisions primarily reflect a modestly flatter revenue growth trajectory combined with slightly less favorable margin assumptions.
Turning to valuation, despite our modestly lower earnings outlook, we are leaving our DCF-derived price target unchanged at $1.00, reflecting a lower risk profile in light of recent initiatives to further diversify ETST’s business mix, we believe. 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. Furthermore, a more favorable regulatory backdrop (particularly as it relates to compounding pharmacies vs. big pharma) and/or further acquisitions of strategically complementary assets at attractive valuations likely represent powerful catalysts for ETST.
Moreover, while apples-to-apples comparisons for ETST remain challenging given the company’s unique business model as well as the lack of truly comparable publicly-traded stocks, our curated peer group of publicly-traded compound pharmacy companies, traditional pharmacy retailers, and telehealth providers continues to trade at meaningfully higher Price-to-Earnings multiples, suggesting meaningful upside for the stock should the shares trade closer to peer-like multiples.
We highlight the following key takeaways from F1Q26 results:
1. Rounding out the portfolio: In April, the company completed the acquisition of Las Villas Health Care, a Florida-based “brick and mortar” healthcare practice focused on Spanish-speaking communities in South Florida. Similar to Mister Meds, the plan for Las Villas seemingly includes acquiring real estate to combine hard assets with operating businesses to minimize macroeconomic risk and maximize returns. In conjunction with Las Villas, the company acquired DOConsultations.com, an online telemedicine platform based in Florida that likely enhances ETST’s telehealth platform (including Peaks Curative), with prescriptions fulfilled by RXCompound and Mister Meds. Furthermore, ETST recently acquired 80% of Magnefuse, LLC, with an option to purchase the residual 20% over time. Magnefuse operates MagneCHEF.com, a retail consumer company offering high-performance kitchen tools. While at first glance, Magnefuse may seem like somewhat of an outlier in the context of the company’s other healthcare-related subsidiaries, management plans to leverage the holding company’s marketing infrastructure, capabilities, and relationships to boost sales, thereby further diversifying ETST’s industry/business mix.
2. Plenty of growth drivers: As mentioned earlier, ETST benefitted from a considerably broader revenue profile in F1Q26 with incremental contributions across the company’s compounding pharmacy, telehealth, “brick and mortar” healthcare, and retail consumer segments. Looking ahead, key growth drivers likely include increasingly activating recently acquired assets. More specifically, we anticipate Peaks Curative sales to continue to ramp up, particularly as RXCompound obtains licenses in new states. Furthermore, we note Mister Meds recently commenced compounding sterile medications, and F2026 revenues will incorporate a full year of contributions from Avenvi, Las Villas, DOConsultations.com, and MagneCHEF. Second, we foresee ongoing consolidation across the compounding pharmacy industry, with market shares continuing to roll up to scale-enabled, diversified players. Third, management recently expanded the sales team and launched marketing initiatives to broaden awareness across physicians/healthcare providers, with the goal of driving stepped-up growth in fulfillments. Finally, Avenvi, ETST’s real estate investment/financing subsidiary, remains well positioned to generate accelerating revenue/earnings contributions, particularly as the company’s community of single-family homes comes to market.
3. Shifting focus to optimizing profitability: Following the closings of more recent acquisitions, ETST maintains a diversified portfolio of largely complementary businesses well positioned to scale, with senior officials increasingly focused on extracting synergies and maximizing profitability. While we forecast a modest decline in margins in F2026 (largely reflecting a step up in marketing costs to enhance sales growth), we forecast ETST’s operating margin to expand from 10.4% in F2025 to 13.3% in F2027. Beyond strong revenue growth, key drivers are likely to include elevated gross margins at RXCompound and Peaks Curative, limited hiring needs combined with a lack of Employee Stock Ownership Plans (ESOPs), thereby limiting dilution and resulting in cleaner accounting, 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. To the point, management recently stood up a centralized/cross-divisional customer support service center in Florida.
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