By Michael Kim
OTC:ETST
READ THE FULL ETST RESEARCH REPORT
We are initiating coverage of Earth Science Tech, Inc. (OTC:ETST) with a 12-month price target of $1.00, translating into a sizeable upside from the stock’s current price. Earth Science Tech is a strategic holding company, with wholly-owned subsidiaries operating in the compounding pharmaceutical, telehealth, real estate, and consumer products sectors. Senior executives remain focused on managing and optimizing company operations, as well as acquiring complementary assets.
Our investment thesis revolves around:
1. Industry tailwinds: In contrast to standardized prescription drugs manufactured in mass by largescale pharmaceutical companies, compounding pharmacies formulate customized medications tailored for specific individual needs. In aggregate, revenues across the U.S. compounding pharmacy market are projected to rise from $6.3 billion in 2024 to $10.8 billion in 2033 representing a 6.1% Compound Annual Growth Rate (CAGR). Much of the growth across the industry can be attributed to: a) rising demand for personalized medications; b) emerging compounding technologies including Artificial Intelligence (AI) to enhance safety, efficacy, productivity, and efficiencies; c) Therapeutic Area (TA) expansion, with a focus on weight loss, Hormone Replacement Therapy (HRT), and chronic disease treatments; and d) ongoing supply shortages opening the door for compounding pharmacies to fill the gaps left by drug manufacturers.
Telehealth/telemedicine businesses provide digital healthcare services via video, phone, or online platforms. Looking ahead, revenues across the U.S. market are forecast to rise from $35.8 billion in 2024 to $160.5 billion in 2034 translating into a 16.2% CAGR. Key growth drivers likely include: a) rising adoption of telehealth services reflecting ubiquitous internet availability and smartphones, enhanced convenience/accessibility, and lower costs; b) deepening integration of technologies (particularly AI) to augment telehealth capabilities; c) the COVID-19 pandemic and related lockdowns hastened the uptake of virtual consultations and remote patient monitoring; and d) healthcare providers increasingly leveraging digital channels to manage chronic conditions.
2. Real estate optionality: Avenvi, acquired in late 2024, is a real estate investment/financing company with a diversified portfolio of assets. Beyond sourcing locations for ETST’s other portfolio companies, Avenvi remains well positioned to generate accelerating revenue/earnings contributions, particularly as the company’s community of single-family homes comes to market. Stepping back, the Florida housing market continues to stabilize, with favorable lead indicators around: a) positive macroeconomic, demographic, and mortgage rate trends likely drive accelerating sales going forward; b) home prices remain relatively steady; c) new listings continue to trend higher, thereby building inventory; and d) supply/inventory and demand/sales rates are generally in balance suggesting a constructive backdrop for both buyers and sellers.
3. Multiple growth drivers: We look for ETST revenues to continue to step higher reflecting several powerful drivers. First, following a period of active M&A, we forecast meaningful growth related to activating newly 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 fiscal year 2026 (ending March 31, 2026) revenues will incorporate a full year of contributions from Avenvi, Las Villas, and DOConsultations.com. Second, we foresee ongoing consolidation across the compounding pharmacy industry, with market shares continuing to roll up to scale-enabled, diversified players. To the point, smaller independent providers with concentrated product/payer profiles likely increasingly struggle to pivot considering the shifting regulatory landscape. 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.
4. Accelerating financial performance: Our model calls for EPS to hit $0.02 for F2026 followed by $0.05 in F2027. Key modeling inputs include: a) strong revenue growth reflecting reaccelerating sales for RXCompound in light of new protocols (formulations/dosages) for GLP-1 medications, rising sales at Peaks Curative, Mister Meds recently obtaining full licensure as a compounding pharmacy and commencing operations, and the recent additions of Las Villas and DOConsultations.com; b) high incremental margins, as revenues continue to ramp up, with ETST’s holding company structure enabling subsidiaries to leverage centralized corporate functions, thereby streamlining expenses across the portfolio; and c) senior executives likely maintain an opportunistic approach as it relates to ongoing share repurchases, thereby providing support for EPS, as the diluted share count continues to trend down, as well as the stock price.
5. Upward revaluation candidate: ETST continues to trade at what we believe to be an unsustainably low valuation, with much of the steep discount attributable to a lack of awareness in the market, 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, consistent 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.
Our DCF-derived price target of $1.00 suggests a wide disconnect between ETST’s fundamentals and the stock’s current price. As a crosscheck, our curated peer group of compound pharmacy companies, traditional pharmacy retailers, and telehealth providers is currently trading at average P/E multiples of 24.8x based on 2025 estimates and 16.9x next year’s earnings. At present, we calculate ETST is trading at just 3.9x our EPS estimate of $0.05 for the fiscal year ending March 31, 2027, suggesting meaningful upside for the stock should the shares trade closer to peer-like multiples. Simply applying a blended multiple to our F2027 (Mar) EPS estimate of $0.05 translates into a fair value north of $1.00 for the stock.
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