Cal-Maine Foods Inc (NASDAQ:CALM), a $2.09B mid-cap, operates in the consumer staples sector, 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 12.78% in the upcoming year , and a single-digit 2.81% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether Cal-Maine Foods is a laggard or leader relative to its consumer staples sector peers. View our latest analysis for Cal-Maine Foods
What’s the catalyst for Cal-Maine Foods’s sector growth?
Disruption from consumers is becoming more prominent than that of industry competitors. Consumers are predominantly leaning towards more health-conscious alternatives such as whole and raw ingredients. Additionally, new companies with unique business models have emerged in the wake of this healthier food trend. In the previous year, the industry saw growth of 5.66%, though still underperforming the wider US stock market. Cal-Maine Foods lags the pack with its earnings falling by more than half 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, Cal-Maine Foods may also be a cheaper stock relative to its peers.
Is Cal-Maine Foods and the sector relatively cheap?
The food product sector’s PE is currently hovering around 21.9x, in-line with the US stock market PE of 20.1x. 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 12.47% compared to the market’s 10.42%, potentially illustrative of past tailwinds. Since Cal-Maine Foods’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Cal-Maine Foods’s value is to assume the stock should be relatively in-line with its industry.
Cal-Maine Foods has been a food product industry laggard in the past year. If Cal-Maine Foods has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its consumer staples peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Cal-Maine Foods’s fundamentals in order to build a holistic investment thesis.
- 1. 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.
- 2. Historical Track Record: What has CALM’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.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Cal-Maine Foods? 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 pass 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.