The food industry is expected to grow despite the tense macroeconomic backdrop. With food stocks proving great defensive options amid fears of a recession, investors can now look to buy fundamentally strong, budget-friendly food stocks Saputo (SAPIF), Want Want China (WWNTY), and Industrias Bachoko (IBA). Read ahead.
Recent bank failures and the Fed’s rate hikes to bring inflation down to the 2% target level have raised the prospect of a recession this year. Amidst this uncertain backdrop, investors can seek refuge in food stocks which can be recession-proof safe havens.
Therefore, we feel that buy budget-friendly food stocks Saputo Inc. (SAPIF), Want Want China Holdings Limited (WWNTY), and Industrias Bachoko, SAB de CV (IBA) may now be sensible.
Food market is witnessing strong growth. According to Statista, the revenue of the food market is expected to reach $9.43 trillion in 2023 and grow at 6.2% annually till 2027.
Moreover, quick-service and fast-food restaurants have grown in popularity in recent years. Quick-service restaurants and fast food markets a. will grow on CAGR 5.60% till 2030.
Additionally, the growing food automation market provides safety while increasing profitability for food companies. Robotics, Internet of Things (IoT), data analytics, digital twins, artificial intelligence and other advanced automation technologies are central to the industry.
It is not surprising that the worldwide food automation market is expected to grow will reach $15.10 billion by 2030growing at a CAGR of 4.9%.
Let us discuss the above mentioned stocks in detail.
Saputo Inc. (SAPIF)
Headquartered in Montreal, Canada, SAPIF manufactures, markets and distributes dairy products in Canada, the United States, Argentina, Australia and the United Kingdom.
SAPIF’s forward price/sales of 0.85x is 23.2% below the industry average of 1.10x. in front of him EV/Sales The ratio of 1.07 is 37.2% lower than the industry average of 1.71.
SAPIF’s trailing-12-month asset turnover ratio of 1.24x is 44% higher than the industry average of 0.86x.
In the third quarter ended December 31, 2022, SAPIF’s revenue came in at C$4.59 billion ($3.44 billion), up 17.6% year-over-year. Its adjusted EBITDA rose 38.2% year-over-year to C$445 million ($333.94 million).
Also, its adjusted net earnings came in at C$221 million ($165.84 million), up 59% year-over-year. In comparison, its adjusted EPS rose 60.6% year-over-year to $0.53.
Analysts expect SAPIF’s revenue to grow 16.9% year-over-year to $13.18 billion in 2023. Its EPS is expected to grow 45.5% year-over-year to $1.28 in 2023. It has exceeded EPS estimates in three out of four quarters. Shares of SAPIF rose 13.1% over the past six months to close the last trading session at $26.12.
of SAPIF POWR Ratings Reflect on this hopeful outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weight.
SAPIF has an A grade for stability and a B for growth. Inside the B-rated Food Makers industry, it is ranked #19 out of 81 stocks. Click here For additional POWR ratings for Growth, Stability, Sentiment and Momentum for SAPIF.
Want Want China Holdings Limited (WWNTY)
Headquartered in Kowloon Bay, Hong Kong, WWNTY is an investment holding company that manufactures, distributes and sells food and beverages. The company operates in four segments: Rice Crackers; dairy products and beverages; snack food; and other products.
WWNTY’s forward EV/EBITDA of 8.78x is 28% below the industry average of 12.20x. Its forward EV/EBIT ratio of 10.34 is 32.4% below the industry average of 15.29.
WWNTY’s trailing-12-month gross profit and EBITDA margin of 42.94% and 22.78% are 36.5% and 112.6% higher than the industry average of 31.46% and 10.72%, respectively.
WWNTY’s total current liabilities came to RMB8.62 billion ($1.26 billion) for the period ended September 30, 2022, compared to RMB9.25 billion ($1.35 billion) for the period ended December 31, 2022. Also, its total liabilities came in at RMB12.03 billion ($1.76 billion) compared to RMB13.15 billion ($1.92 billion) for the same period.
The Street expects WWNTY’s revenue to grow 6% year-over-year to $3.64 billion in 2024. Shares of WWNTY fell marginally intraday to close the last trading session at $31.62.
It’s no surprise that WWNTY has an overall B rating, which equates to a Buy in our POWR rating system. It has an A grade for stability and a B grade for quality. It ranks #15 in the same industry.
Apart from those mentioned above, we also rate WWNTY for growth, value, momentum and sentiment. Get all WWNTY ratings here.
Industrias Bachoco, SAB de CV (IBA)
Headquartered in Celaya, Mexico, IBA is a subsidiary of the Robinson Bourse Family Trust. The company, through its subsidiaries, operates as a poultry producer in Mexico and the United States. The company operates in two segments, Poultry and Others.
IBA’s forward EV/sales of 0.40x is 76.7% below the industry average of 1.71x. Its forward price/sales multiple of 0.53 is 51.7% below the industry average of 1.10.
IBA’s trailing 12-month ROTA of 8.52x is 104.2% higher than the industry average of 4.17x. Its trailing 12-month 9.72% ROTC is 53.6% higher than the 6.33% industry average.
In the fiscal fourth quarter ended December 31, 2022, IBA’s net sales increased 11.2% year over year to $1.21 billion. Its total current assets came in at $2.05 billion for the period ended December 31, 2022, up from $1.85 billion for the period ended December 31, 2021.
Also, its total current liabilities came in at $541.20 million compared to $618.40 million for the same period.
IBA’s revenue is expected to grow 6.5% and modestly year-over-year to $5.24 billion in 2023. Its EPS is expected to come in at $6.03 for 2023. It has beaten EPS estimates in the last three quarters. Over the past nine months, the stock has gained 47.1% to close the last trading session at $59.79.
IBA’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It ranks #17 in the same industry. It has B for stability and spirit. To view additional IBA’s ratings for Growth, Value, Momentum and Quality, click here.
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SAPIF shares were unchanged in premarket trading on Monday. Year-to-date, SAPIF has gained 5.54% versus a gain of 8.26% in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, she aspires to make complex financial matters understandable to individual investors and help them make sound investment decisions.
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