Redcare Pharmacy: Strong Growth Meets Investor Skepticism

Despite delivering robust financial performance and expanding its operations, Redcare Pharmacy shares have reached their lowest valuation point. This apparent contradiction stems from investor apprehension regarding the company's substantial capital expenditures. However, this very investment strategy may ultimately position the online pharmacy for long-term market leadership.

Redcare's German prescription segment has become a significant revenue driver, demonstrating remarkable expansion. During the third quarter of 2025, revenue from prescription medications surged by 82.1 percent to reach €126 million—more than doubling compared to the same period last year.

Through the first nine months of the year, the German prescription business recorded an even more impressive 121.6 percent growth. This momentum directly benefits from Germany's transition toward electronic prescriptions, representing a multi-billion euro market with substantial growth potential for digital providers like Redcare.

The company's total revenue advanced by 25 percent in Q3 to €719 million. Adjusted EBITDA reached €17.1 million, achieving a margin of 2.4 percent—positioning the company precisely within management's target range.

Should investors sell immediately? Or is it worth buying Redcare Pharmacy?

Strategic Investments Impact Short-Term Cash Flow

The company's aggressive investment in future capacity has created temporary financial pressure. Free cash flow declined to negative €84 million during the third quarter, primarily due to one-time investments totaling €51 million. These expenditures funded a new distribution center in the Czech Republic and automation initiatives for electronic prescription processing.

While these capital outlays temporarily affect profitability, they are expected to significantly enhance operational efficiency in the medium term. Management has reaffirmed its full-year guidance despite these substantial investments, projecting revenue growth exceeding 25 percent with an EBITDA margin between 2.0 and 2.5 percent.

Market Experts Maintain Bullish Outlook

Financial analysts remain optimistic about Redcare's prospects despite the stock's weak performance throughout 2025. The average price target among market researchers stands at €151—more than double the current trading level. For 2026, industry specialists forecast revenue of €3.57 billion, representing 27 percent growth.

The company's customer base continues to expand, reaching 13.7 million active users. Simultaneously, the average basket value has increased to €67.12, marking an 8.5 percent rise driven by the growing proportion of higher-margin prescription sales.