With a recent daily loss of 2.26% and a 3-month decline of 2.08%, JM Smucker Co (SJM, Financial) presents an interesting case for investors. The company's Loss Per Share stands at $0.87, raising the question: Is the stock modestly undervalued? This article delves into the valuation analysis of JM Smucker Co (SJM), inviting readers to explore the intricacies of its market position and potential for future growth.
Company Introduction
JM Smucker Co (SJM, Financial) is a prominent packaged food company with a significant presence in the U.S. retail channel, accounting for 77% of its forecast fiscal 2024 revenue. The company's strategic focus has shifted following the divestiture of several pet foods brands and private-label products, which represented about $1.5 billion in sales. Its largest category, retail coffee, which includes well-known brands like Folgers and Dunkin', now constitutes 33% of sales. Pet foods, featuring leading brands such as Milk-Bone and Meow Mix, make up 22% of sales. Additionally, approximately 22% of sales come from consumer foods, with Jif and Smucker's being the primary brands. The acquisition of Hostess Brands in fiscal 2024 aims to enhance JM Smucker Co's footprint in the snack and convenience store segments. With a current stock price of $117.54 and a GF Value of $144.61, the company's valuation warrants a closer examination.
Summarize GF Value
The GF Value is a proprietary metric used to determine the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line suggests the stock's ideal trading value. If a stock's price is significantly above this line, it may be overvalued, whereas a price below the line indicates potential undervaluation and higher future returns. Currently, JM Smucker Co (SJM, Financial), with a market cap of $12.50 billion, appears to be modestly undervalued, suggesting an attractive investment opportunity for value-driven investors.
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Financial Strength Analysis
Investing in companies with robust financial strength minimizes the risk of permanent capital loss. It's crucial to evaluate the financial health of a company before purchasing its stock. JM Smucker Co's cash-to-debt ratio stands at 0, placing it below the industry benchmark. The company's financial strength is rated 5 out of 10 by GuruFocus, signifying a fair level of financial stability.
Profitability and Growth
Consistent profitability over time is indicative of a lower-risk investment. JM Smucker Co has maintained profitability for 9 out of the past 10 years, with revenue of $8.20 billion and a Loss Per Share of $0.87 over the past twelve months. The company's operating margin of 16.97% ranks favorably within the Consumer Packaged Goods industry. In terms of growth, the 3-year average annual revenue growth rate is 5.3%, which is lower than the industry average. The 3-year average EBITDA growth rate is -28.3%, placing JM Smucker Co in a less favorable position compared to industry peers.
ROIC vs. WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another way to gauge a company's profitability. A higher ROIC than WACC suggests value creation for shareholders. However, JM Smucker Co's ROIC of -210.78 is significantly lower than its WACC of 4.06, raising concerns about its value generation capabilities.
Conclusion
In summary, JM Smucker Co (SJM, Financial) appears modestly undervalued, offering potential for higher long-term returns. The company's financial condition is fair, and its profitability is reasonable. However, its growth is less impressive, ranking below many of its competitors. For a more detailed understanding of JM Smucker Co's financials, investors can explore 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.
