With a daily loss of 11.24% and a 3-month loss of 16.43%, Fresh Del Monte Produce Inc (FDP, Financial)'s stock has been on a downward trend. Despite these losses, the company's Earnings Per Share (EPS) stands at 2.87. This raises a pertinent question: is the stock modestly undervalued? To answer this question, we delve into a comprehensive valuation analysis of Fresh Del Monte Produce Inc (FDP). We invite you to journey with us as we unravel the intrinsic value of this stock.
Company Introduction
Fresh Del Monte Produce Inc is an integrated producer, marketer, and distributor of high-quality fresh-cut fruit and vegetables. The company operates in three segments, Fresh and value-added products segment, Banana segment, and Other products and services segment. The majority of its revenue is from the Fresh and value-added products segment. The company has a significant presence in North America, Europe, Asia, and the Middle East, with North America being its largest market.
At a glance, Fresh Del Monte Produce Inc's (FDP, Financial) stock price stands at $22.19, while its GF Value, an estimation of its fair value, is $27.41. This suggests that the stock might be undervalued. For a clearer picture, let's delve deeper into the company's valuation.
Understanding GF Value
The GF Value is a unique valuation method developed by GuruFocus. It estimates a stock's intrinsic value based on three key factors: historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line provides an overview of the fair value that the stock should be traded at.
When a stock's price is significantly above the GF Value Line, it's likely overvalued and may offer poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and potentially offer higher future returns. Based on this analysis, Fresh Del Monte Produce Inc (FDP, Financial), with a market cap of $1.10 billion, appears to be modestly undervalued.
Given this undervaluation, the long-term return of Fresh Del Monte Produce's stock is likely to exceed its business growth.
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Financial Strength
Investing in companies with strong financial strength lowers the risk of permanent loss. A useful way to assess a company's financial strength is by looking at its cash-to-debt ratio and interest coverage. Fresh Del Monte Produce's cash-to-debt ratio of 0.07 is lower than 82.67% of the companies in the Consumer Packaged Goods industry, indicating a fair financial strength of 7 out of 10.
Profitability and Growth
Consistent profitability over the long term reduces investment risk. Fresh Del Monte Produce has been profitable for 8 out of the past 10 years. In the past twelve months, the company had a revenue of $4.40 billion and an Earnings Per Share (EPS) of $2.87. Its operating margin of 4.43% is lower than 50.71% of the companies in the Consumer Packaged Goods industry, indicating a fair profitability rank of 6 out of 10.
Growth is a crucial factor in a company's valuation. Companies that grow faster create more value for shareholders, especially if the growth is profitable. Fresh Del Monte Produce's average annual revenue growth is 0%, which is lower than 0% of the companies in the Consumer Packaged Goods industry. Its 3-year average EBITDA growth is 3.6%, ranking lower than 55.1% of the companies in the industry.
ROIC vs WACC
Another way to evaluate a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Fresh Del Monte Produce's ROIC was 5.76, while its WACC was 6.88.
Conclusion
In conclusion, Fresh Del Monte Produce's stock appears to be modestly undervalued. The company's financial condition and profitability are fair, though its growth ranks lower than 55.1% of the companies in the Consumer Packaged Goods industry. To learn more about Fresh Del Monte Produce's stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
