The future of the food industry looks exciting with changing preferences and demands of consumers. Food companies are bringing new innovations to capitalize on the demand for new food trends.
Given the solid growth prospects of the food industry, it could be wise to consider investing in fundamentally strong food stocks Sysco Corporation (SYY), WH Group Limited (WHGLY), and Seaboard Corporation (SEB).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the food industry.
The CPI for March rose 0.1% for the month and 5% on an annual basis, showing continuing signs of inflation easing. This bodes well for the margins of the food industry as input costs cool off and demand returns.
Food companies are bringing innovation to develop and commoditize new food products, processes, and services. With the ever-changing consumer preferences and dietary needs, food companies are constantly developing and coming up with new products. Moreover, food companies are looking for ways to offer more healthy, sustainable offerings.
Plant-based meat alternatives, sustainable packaging, cultured meat, locally sourced produce, dairy-identical products, plant-based milk, and others are some of the food industry innovations that have caught investors’ attention.
Many companies have increased investments to boost their research and development efforts in launching new plant and protein alternative products. Moreover, several companies are working on reducing the impact on the environment from agriculture.
According to Statista, revenue in the food market is projected to reach $9.43 trillion in 2023 and grow at a CAGR of 6.2% until 2027. The future of food will be driven by innovations. The global plant-based meat market is expected to grow at a CAGR of 24.9% to reach $24.80 billion by 2030.
Given these factors, investors could benefit from fundamentally strong food stocks SYY, WHGLY, and SEB.
Let’s discuss the fundamentals of the featured stocks.
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products, primarily to the foodservice or food-away-from-home industry worldwide. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments.
In terms of the forward non-GAAP P/E, SYY’s 18.79x is 2.2% lower than the 19.22x industry average. Its 0.64x forward EV/Sales is 63% lower than the 1.73x industry average. Likewise, its 0.50x forward Price/Sales is 57.5% lower than the 1.17x industry average.
SYY’s non-GAAP operating income for the third quarter ended April 1, 2023, increased 27.8% year-over-year to $735.50 million. The company’s non-GAAP net earnings increased 26.9% year-over-year to $460.50 million. Its adjusted EBITDA increased 19% year-over-year to $899.70 million. Also, its non-GAAP EPS increased 26.8% from the prior-year period to $0.90.
Analysts expect SYY’s EPS and revenue for the quarter ended June 30, 2023, to increase 16.1% and 5% year-over-year to $1.33 and $19.91 billion, respectively. The stock has fallen 1.5% year-to-date to close the last trading session at $75.32.
SYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Food Makers industry, it is ranked #5 out of 79 stocks. It has a B grade for Growth, Value, Momentum, and Stability. To see the additional ratings of SYY for Sentiment and Quality, click here.
WH Group Limited (WHGLY)
Headquartered in Kowloon, Hong Kong, WHGLY, an investment holding company, engages in the production, wholesale, and retail sale of meat products in China, the United States, Mexico, and Europe. The company operates through Packaged Meats, Pork, and Others segments.
In terms of the forward EV/Sales, WHGLY’s 0.38x is 77.9% lower than the 1.73x industry average. Its 4.10x forward EV/EBITDA is 66.1% lower than the 12.09x industry average. Likewise, its 0.28x forward Price/Sales is 76.3% lower than the 1.17x industry average.
WHGLY’s revenue for the first quarter ended March 31, 2023, increased 2.9% year-over-year to $6.74 billion. Its profit attributable to owners of the company came in at $174 million. The company’s total assets came in at $20.37 billion, compared to $19.86 billion for the fiscal year ended December 31, 2022. Moreover, its EPS came in at $1.36.
WHGLY’s revenue for fiscal 2023 is expected to increase by 1.6% year-over-year to $28.60 billion. Over the past six months, the stock has gained 7.9% to close the last trading session at $11.03.
WGHLY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #3 in the same industry. It has an A grade for Value and a B for Growth and Stability. We have also given WHGLY grades for Momentum, Sentiment, and Quality. Get all WHGLY ratings here.
Seaboard Corporation (SEB)
Seaboard Corporation operates as an agricultural and transportation company worldwide. It operates through six segments: Pork, Commodity Trading and Milling (CT&M), Marine, Sugar and Alcohol, Power, and Turkey.
In terms of the trailing-12-month EV/Sales, SEB’s 0.44x is 75% lower than the 1.78x industry average. Its 5.62x trailing-12-month EV/EBITDA is 60.3% lower than the 14.15x industry average. Likewise, its 0.39x trailing-12-month Price/Sales is 67.7% lower than the 1.22x industry average.
SEB’s total net sales for the quarter ended April 1, 2023, came in at $2.50 billion. Its other sales rose 188.9% year-over-year to $52 million. The company’s total other income came in at $50 million, compared to a loss of $27 million in the prior-year quarter. Its total liabilities declined 3.5% to $2.79 billion, compared to $2.89 billion for the fiscal year ended December 31, 2022.
Over the past six months, the stock has gained 1.3% to close the last trading session at $3,823.27.
SEB’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy. It is ranked #7 in the Food Makers industry.
It has an A grade for Stability and a B for Growth, Value, and Sentiment. Click here to see the other ratings of SEB for Momentum and Quality.
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SYY shares were trading at $75.79 per share on Thursday morning, up $0.47 (+0.62%). Year-to-date, SYY has gained 0.41%, versus a 6.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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