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While Fresh Del Monte Produce Inc. (NYSE:FDP) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Fresh Del Monte Produce’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Fresh Del Monte Produce
What is Fresh Del Monte Produce worth?
Great news for investors – Fresh Del Monte Produce is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fresh Del Monte Produce’s ratio of 14.19x is below its peer average of 21.52x, which indicates the stock is trading at a lower price compared to the Food industry. Another thing to keep in mind is that Fresh Del Monte Produce’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Fresh Del Monte Produce?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Fresh Del Monte Produce, it is expected to deliver a negative earnings growth of -8.9%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although FDP is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to FDP, or whether diversifying into another stock may be a better move for your total risk and return.