Key Points
Turning Point Brands reported earnings this week.
The company's nicotine pouch business is growing quickly, but it is coming at the expense of short-term profits.
Shares of the stock look cheap if you believe fast pouch growth will continue.
Shares of Turning Point Brands(NYSE: TPB) sank 33% this week, according to data from S&P Global Market Intelligence. A fast-growing player in the nicotine pouch space, Turning Point Brands missed on its earnings expectation in Q4 and is projecting weak guidance for 2026, according to Wall Street. The stock has been a large winner over the last year, and is still up around 50% in the last twelve months.
Is now a great time to buy the dip on Turning Point Brands? Let's see why shares fell this week, and whether they are a buy for your portfolio today.
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Weakened expectations
Turning Point Brands owns Zig-Zag rolling papers for tobacco and marijuana, as well as Stoker's chewing tobacco. However, its crown jewel from a growth perspective is its modern oral business, namely nicotine pouches. Modern Oral revenue grew 266% year over year last quarter to $41.3 million and now makes up 34% of overall company sales.
Management is guiding for further growth in 2026, with net revenue in modern oral of $180 million-$190 million. However, to scale up its nicotine pouch business, Turning Point Brands is now investing heavily in marketing and distribution, which will temporarily disrupt profitability. Adjusted earnings are expected to be $24 million to $27 million in the first quarter, down from $119 million in 2025 on an annualized basis.
Image source: Getty Images.
Time to buy the dip?
After a rapid dip this week, Turning Point Brands' stock now trades at a market cap of $1.75 billion. It has a price-to-earnings ratio (P/E) of 29, which doesn't look that cheap. However, the company is still in investment mode, and trades at a price-to-sales ratio (P/S) of 3.7. This is a low figure for a fast-growing company in a sector with strong unit economics (nicotine).
If you are a believer in Turning Point Brands and its nicotine pouch business, now could be a good time to buy the dip on the stock.
Should you buy stock in Turning Point Brands right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends Turning Point Brands. The Motley Fool has a disclosure policy.
