Bridgford Foods Corporation (NASDAQ:BRID), a USD$113.91M small-cap, is a consumer staples company operating in an industry which is facing a change in consumer taste and pressure for organic and sustainable foods, spurred by more health-conscious consumers. Consumer staple analysts are forecasting for the entire industry, a strong double-digit growth of 12.44% in the upcoming year , and a single-digit 6.29% growth over the next couple of years. However, this rate is still more than double the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Bridgford Foods is lagging or leading in the industry. View our latest analysis for Bridgford Foods
What’s the catalyst for Bridgford Foods’s sector growth?
Disruption from consumers is becoming more prominent than that of industry competitors. Many consumers now prefer to buy whole, raw ingredients and prepare more of their meals at home. Additionally, new companies with unique business models have emerged in the wake of this healthier food trend. Over the past year, the industry saw growth of 5.42%, though still underperforming the wider US stock market. Bridgford Foods lags the pack with its negative growth rate of -47.63% over the past year, which indicates the company will be growing at a slower pace than its food product peers. As the company trails the rest of the industry in terms of growth, Bridgford Foods may also be a cheaper stock relative to its peers.
Is Bridgford Foods and the sector relatively cheap?
The food product industry is trading at a PE ratio of 21x, relatively similar to the rest of the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 12.33% on equities compared to the market’s 10.44%. On the stock-level, Bridgford Foods is trading at a lower PE ratio of 14x, making it cheaper than the average food product stock. In terms of returns, Bridgford Foods generated 19.71% in the past year, which is 7.38% over the food product sector.
What this means for you:
Are you a shareholder? Bridgford Foods has been a food product industry laggard in the past year. This is possibly reflected in the PE ratio, with the stock trading below its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Bridgford Foods as part of your portfolio, or maybe increase your holding. If you’re bearish on the stock, now may not be the best time to sell!
Are you a potential investor? If Bridgford Foods has been on your watchlist for a while, now may be the time to dig deeper into the stock. Although the stock delivered lower growth relative to its peers, Bridgford Foods is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Bridgford Foods’s other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Bridgford Foods’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer staples stocks instead? Use our free playform to see my list of over 100 other consumer staples companies trading on the market.
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The author is an independent contributor and at the time of publication had no position in the stocks mentioned.