Are John B. Sanfilippo & Son, Inc.'s (NASDAQ:JBSS) Fundamentals Good Enough to Warrant Buying Given The Stock's Recent Weakness?

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editorial-team@simplywallst.com (Simply Wall St)

Mon, Mar 31, 2025, 4:48 AM 4 min read

John B. Sanfilippo & Son (NASDAQ:JBSS) has had a rough three months with its share price down 18%. However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. In this article, we decided to focus on John B. Sanfilippo & Son's ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Do You Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for John B. Sanfilippo & Son is:

15% = US$49m ÷ US$326m (Based on the trailing twelve months to December 2024).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.15 in profit.

Check out our latest analysis for John B. Sanfilippo & Son

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of John B. Sanfilippo & Son's Earnings Growth And 15% ROE

At first glance, John B. Sanfilippo & Son seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 10%. However, we are curious as to how the high returns still resulted in flat growth for John B. Sanfilippo & Son in the past five years. Therefore, there could be some other aspects that could potentially be preventing the company from growing. For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance.

As a next step, we compared John B. Sanfilippo & Son's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 11% in the same period.

past-earnings-growth — NasdaqGS:JBSS Past Earnings Growth March 31st 2025

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if John B. Sanfilippo & Son is trading on a high P/E or a low P/E, relative to its industry.

Is John B. Sanfilippo & Son Using Its Retained Earnings Effectively?

John B. Sanfilippo & Son has a low three-year median payout ratio of 14% (or a retention ratio of 86%) but the negligible earnings growth number doesn't reflect this as high growth usually follows high profit retention.

Moreover, John B. Sanfilippo & Son has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth.

Conclusion

Overall, we feel that John B. Sanfilippo & Son certainly does have some positive factors to consider. However, given the high ROE and high profit retention, we would expect the company to be delivering strong earnings growth, but that isn't the case here. This suggests that there might be some external threat to the business, that's hampering its growth. Up till now, we've only made a short study of the company's growth data. You can do your own research on John B. Sanfilippo & Son and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.