What’s Installed For Calavo Growers Inc (NASDAQ:CVGW)?
Calavo Growers Inc (NASDAQ:CVGW), a US$1.86b small-cap, operates in the consumer staples sector, which supplies necessities to consumers. This means it is less sensitive to changes in the economic cycle given that demand remains relatively stable over time. Consumer staple analysts are forecasting for the entire industry, a fairly unexciting growth rate of 5.3% in the upcoming year , and a massive growth of 32.7% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether Calavo Growers is lagging or leading in the industry.
View our latest analysis for Calavo Growers
What’s the catalyst for Calavo Growers’s sector growth?
Changing tastes in consumer preferences is becoming more disruptive than that of industry competitors. Consumers are predominantly leaning towards more health-conscious alternatives such as whole and raw ingredients. Furthermore, companies that are now emerging are latching on these trends with efficient business models. In the past year, the industry delivered growth in the twenties, beating the US market growth of 15.3%. Calavo Growers lags the pack with its lower growth rate of 0.4% over the past year, which indicates the company has been growing at a slower pace than its food product peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 37.6% in the upcoming year. This future growth may make Calavo Growers a more expensive stock relative to its peers.
Is Calavo Growers and the sector relatively cheap?
Food product companies are typically trading at a PE of 17.96x, relatively similar to the rest of the US stock market PE of 19.84x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 13.3% compared to the market’s 10.6%, potentially illustrative of past tailwinds. On the stock-level, Calavo Growers is trading at a higher PE ratio of 45.79x, making it more expensive than the average food product stock. In terms of returns, Calavo Growers generated 15.0% in the past year, which is 1.7% over the food product sector.
Next Steps:
Calavo Growers’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Calavo Growers has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other food product companies. However, before you make a decision on the stock, I suggest you look at Calavo Growers’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has CVGW’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Calavo Growers? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
