About Fresh Del Monte Produce
This company is bananas, B-A-N-A-N-A-S, this company is bananas, B-A-N-A-N-A-S!
No, Gwen Stefani, we are not claiming ourselves to be Hollaback Girls nor are we trying to steal your thunder.
We’re just rightfully introducing a company that quite literally is one of the world’s largest producers of the famed fruit in question, bananas.
Was it cringe? You bet.
Was it worth it? Big time.
Fresh Del Monte Produce, which we will kindly refer to just as FDP for simplicity’s sake, is known to be a gigantic producer, distributor and marketer of bananas along with a lot of other major fruits and similar edible consumer products.
For instance, this Florida-headquartered company sells canned products such as fresh cut green beans and sliced peaches, bananas, fruit cup snack packs among other products that can be found both on the company’s website as well as on the shelves of your local Dollar General or Walmart.
We say we just get right to it and cut to the chase and get better acquainted with FDP and try to understand whether or not this company’s stock is worth holding onto for the long haul.
Fresh Del Monte Produce’s stock financials
FDP is presently trading at a share price of around $27, has a market capitalization of $1.3 billion, a price-to-earnings (P/E) ratio of 33.72 and distributes an annual dividend of $0.60 to its shareholders.
Right off the bat, it should be noted that shares in FDP stock appear to be modestly overvalued, given that it is generally subscribed to that a P/E of 20 implies that a stock is trading at fair value or what it’s worth paying for whereas anything higher suggests that its overvalued or too expensive given its real, intrinsic value. This is definitely something to keep in mind as we continue our analysis.
As it relates to the company’s balance sheet, FDP’s executive team oversees around $3.4 billion in total assets against approximately $1.6 billion in total liabilities.
This company has a very solid balance sheet as the aggregate value of its total assets are presently more than double that of its total liabilities.
This usually isn’t a bad thing!
In terms of total revenue, FDP’s over the past five years has been ultra consistent. Specifically, the company’s total revenue over the last five years has remained between $4 billion and about $4.5 billion.
This isn’t a very wide range but each year has been consistent, which is nothing to fret upon, especially when the state of the global economy has been as volatile as all get out.
Investors are usually looking for consistency when it’s too late and they’ve already realized losses on their more speculative, riskier investments.
Needless to say, sometimes it pays to invest in a boring company with consistent revenue before the economy turns for the worst and it’s too late.
Onto the company’s cash flow statement, FDP’s total cash from operations has sung a similar tune to that of its total revenue as it has remained eerily consistent, ranging between $128.5 million and $246.6 million over the same time frame.
Fresh Del Monte Produce’s stock fundamentals
We have high standards for larger, scaled companies regardless of industry when it comes to profitability. While we are always ready to lend room for extenuating and/or extraordinary circumstances, a publicly traded company should be held to high standards in this regard and given little leeway or “passes” when it comes to lackluster profit-related numbers.
FDP undoubtedly falls under the category of “larger” and “scaled.”
FDP’s trailing twelve month (TTM) net profit margin is also currently lower than that of the industry’s average.
Specifically, FDP’s TTM net profit margin is 1.53% compared to the industry’s average of 5.75%, according to TD Ameritrade’s platform. It can initially be noted that the industry’s average net profit margin isn’t very high to begin with, which leads us to think that given the low-price nature of the snacks and assorted fruit(s) space (in order to stay competitive by keeping prices low), it’s rather difficult to attain a high net profit margin in the space(s) in general.
Nevertheless, we would’ve hoped a leader like FDP would have been at least at or slightly above the industry and are thoroughly disappointed that this isn’t the case. While there could be more to the story, at the end of the day, numbers don’t lie.
Unless you’re Enron, but that’s a whole other thing.
When it comes to TTM returns on equity, assets and investment, FDP sadly also falls well short of the competition as well.
Although this could be induced by a multitude of reasons, we’re not loving it, especially as their core returns generally aren’t close to that of the industry, indicating that it can take a while for FDP to just catch up to the competition, let alone achieve higher returns and net profit for that matter.
Should you buy Fresh Del Monte Produce stock?
While we’re fairly confident that this company’s revenue figures are likely to stay unchanged for the foreseeable future and that a broad base of consumers are still going to seek and eat FDP’s products, the numbers just aren’t there. FDP comes up short from a profitability, returns and valuation standpoint.
Given all of this information we deem it appropriate to give FDP a “sell” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.