With rising demand for organic and ready-to-eat food, well-positioned players in this space should benefit. So, investors can consider buying fundamentally strong food stocks Danone (DANOY) and Tiger Brands (TBLMY), which are currently trading at a discount under $15. Keep reading.
While rising concerns over lifestyle and health have prompted consumers to shift to organic food, hectic work-life schedules are driving the market for ready-to-eat food. Moreover, the growing food processing market is also expected to boost the industry.
The food industry is witnessing a trend of adopting organic foods, including bakery products, snacks, infant formulas, and confectioneries. This shift is driven by increasing consumer awareness of a healthy lifestyle and government initiatives promoting organic farming.
Also, the demand for novel products and clean-label food items is also driving the growth of the organic food market. The organic foods market is projected to grow at a CAGR of 12.1% to $553.13 billion by 2033.
Moreover, innovation in food processing technology, increased demand for processed food, and rising research & development in food processing machinery are expected to bode well for the industry. The food processing market is projected to grow at a CAGR of 6.6% to $235.67 billion by 2028.
Furthermore, the food market is witnessing a shift in consumer preferences from home-cooked food to ready-to-eat products, owing to working individuals’ busy lifestyles and hectic work schedules. The ready-to-eat food market is projected to register a CAGR of 4.9% until 2028.
Take a look at the stocks mentioned above:
Danone S.A. (DANOY)
Headquartered in Paris, France, DANOY operates in the food and beverage industry worldwide. The company operates through three segments: Essential Dairy & Plant-Based; Specialized Nutrition; and Waters.
DANOY’s forward EV/EBITDA of 10.69x is 12.6% lower than the industry average of 12.22x. Its forward P/B multiple of 2.20 is 26.1% lower than the industry average of 2.98.
DANOY’s trailing-12-month EBITDA margin of 15.38% is 43.1% higher than the 10.7% industry average. Its trailing-12-month gross profit margin of 46.05% is 46.4% higher than the 31.46% industry average.
On April 3, 2023, DANOY declared a quarterly cash dividend of $0.44 per share, payable on June 1, 2023.
The company pays an annual dividend of $0.43, which translates to a yield of 3.27% at the current price level. It has a four-year average dividend yield of 3.42%. Its dividend payouts have grown at a 2.3% CAGR over the past five years.
During the fiscal year ended December 31, 2022, DANOY’s sales increased 13.9% year-over-year to €27.66 billion ($30.46 billion). Recurring operating income grew 1.2% year-over-year to €3.38 billion ($3.72 billion). Also, its EPS came in at €1.48.
DANOY’s revenue is expected to increase 8.4% year-over-year to $7.33 billion for the fiscal first quarter that ended March 2023. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
Shares of DANOY have gained 34.8% over the past six months to close the last trading session at $13.13.
DANOY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability and a B in Quality. It is ranked #12 out of 79 in the B-rated Food Makers industry.
Beyond what is stated above, we’ve also rated DANOY for Value, Growth, Sentiment, and Momentum. Get all DANOY ratings here.
Tiger Brands Limited (TBLMY)
Headquartered in Bryanston, South Africa, TBLMY manufactures and sells fast-moving consumer goods in South Africa.
TBLMY’s forward EV/EBITDA of 7.01x is 42.7% lower than the industry average of 12.22x. Its forward P/S multiple of 0.85 is 25.9% lower than the industry average of 1.15.
TBLMY’s trailing-12-month EBITDA margin of 11.51% is 7.2% higher than the 10.7% industry average. Its trailing-12-month net income margin of 8.42% is 137% higher than the 3.55% industry average.
The company pays an annual dividend of $0.76, which translates to a yield of 6.79% at the current price level. It has a four-year average dividend yield of 7.31%. Its dividend payouts have grown at a 3.6% CAGR over the past three years.
TBLMY’s total revenue rose 126.9% year-over-year to ZAR4.13 billion ($2.26 billion) during the fiscal year that ended September 30, 2022. The company’s gross profit increased 126.9% year-over-year to ZAR4.13 billion ($2.26 billion), while its profit for the year increased 120.7% year-over-year to ZAR4.05 billion ($2.22 billion).
Street expects TBLMY’s revenue for the fiscal year ending September 2023 to increase 3.9% year-over-year to $2.02 billion.
The stock has gained 14.8% over the past six months to close the last trading session at $11.18.
TBLMY’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
TBLMY has an A grade for Growth and a B in Stability and Value. It is ranked #7 in the same industry.
Click here to see the additional POWR Ratings for TBLMY (Momentum, Sentiment, and Quality).
What To Do Next?
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DANOY shares were unchanged in premarket trading Wednesday. Year-to-date, DANOY has gained 24.87%, versus a 6.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor’s degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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