Should You Invest In The Consumer Discretionary Stock Anglo-Eastern Plantations Plc (LON:AEP)?
Anglo-Eastern Plantations Plc (LSE:AEP), a UK£306.39M 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 somewhat weaker growth of 5.69% in the upcoming year , and an optimistic near-term growth of 12.65% over the next couple of years. However, this rate came in below the growth rate of the UK stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Anglo-Eastern Plantations is a laggard or leader relative to its consumer staples sector peers. View our latest analysis for Anglo-Eastern Plantations
What’s the catalyst for Anglo-Eastern Plantations’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. Over the past year, the industry saw growth in the teens, beating the UK market growth of 11.90%. Anglo-Eastern Plantations leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Anglo-Eastern Plantations a more expensive stock relative to its peers.
Is Anglo-Eastern Plantations and the sector relatively cheap?
The food product industry is trading at a PE ratio of 17.07x, relatively similar to the rest of the UK stock market PE of 17.36x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.54% on equities compared to the market’s 12.78%. On the stock-level, Anglo-Eastern Plantations is trading at a lower PE ratio of 9.7x, making it cheaper than the average food product stock. In terms of returns, Anglo-Eastern Plantations generated 12.99% in the past year, which is 1.45% over the food product sector.
Next Steps:
Anglo-Eastern Plantations recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its food product peers, suggesting it is also trading at a relatively cheaper price. If Anglo-Eastern Plantations has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered may not have been fully accounted for in its shares given its lower PE ratio relative to its peers. However, before you make a decision on the stock, I suggest you look at Anglo-Eastern Plantations’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 AEP’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 Anglo-Eastern Plantations? 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.
