By Michael Kim
READ THE FULL ETST RESEARCH REPORT
Pre-market open on 11/12/25, Earth Science Tech (OTC:ETST) reported F2Q26 (Sep) earnings and filed the company’s 10-Q for the three months ended September 30, 2025. For the quarter, ETST reported net income of $0.9 million, or $0.003 per share, right in line with our $0.003 estimate. Relative to our model, a revenue shortfall was offset by lower operating expenses, more favorable non-operating income, and lower shares (Exhibit 1).
Focusing on the top line, ETST generated $9.1 million of revenue in F2Q26, shy of our $10.1 million forecast, but up from $8.5 million for the year-ago quarter. Relative to our model, the variance was seemingly mostly a function of slower ramp ups for newer Mister Meds, Las Villas Health, and DOConsultations businesses. That said, much of the year-over-year growth can be attributed to accelerating product sales at Peaks, partially offset by a decline in pharmaceutical products sales at RXCompound. After factoring in cost of goods sold of $2.3 million, gross profit totaled $6.7 million for F2Q26, representing a gross margin of 74.3% compared to 73.6% for the prior-year quarter.
In aggregate, ETST’s operating expenses totaled $6.1 million for F2Q26 compared to $5.4 million for F2Q25, and came in 3.3% below our $6.4 million forecast. Much of the favorable variance related to lower compensation and general & administrative expenses, partially offset by higher marketing and depreciation & amortization charges.
Turning to the balance sheet, assets totaled $8.7 million, including cash of $1.2 million as of September 30, 2025. By comparison, assets totaled $5.1 million as of September 30, 2024, inclusive of $1.5 million of cash on the balance sheet. Loans and obligations totaled $46,000 as of September 30, 2025, down from $79,000 as of a year ago. Net cash generated from operating activities totaled $1.2 million for the first six months of F2026, reflecting net income of $1.4 million partially offset by realized and unrealized gains on investments and changes in assets and liabilities. In comparison, net cash provided by operating activities totaled $1.9 million in the first six months of F2025. Finally, management repurchased 1,510,000 common shares during the quarter ended September 30, 2025.
Our updated model calls for EPS to total $0.02 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 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 – $39.2 million in F2026 followed by $52.7 million in F2027, representing year-over-year growth rates of 18% and 34%, respectively. 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, DOConsultations.com, and MagneCHEF.
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. 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.
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