Cal-Maine Foods, Inc. – Value Analysis (NASDAQ:CALM) : December 15, 2017

Capitalcube gives Cal-Maine Foods, Inc. a score of 25.

Our analysis is based on comparing Cal-Maine Foods, Inc. with the following peers – Industrias Bachoco SAB de CV Sponsored ADR Class B, Fresh Del Monte Produce Inc., Sysco Corporation, Sanderson Farms, Inc., Pilgrim’s Pride Corporation, Costco Wholesale Corporation and Wal-Mart Stores, Inc. (IBA-US, FDP-US, SYY-US, SAFM-US, PPC-US, COST-US and WMT-US).

Investment Outlook

Cal-Maine Foods, Inc. has a fundamental score of 25 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (2.33) than its peer median (2.99).
  • CALM-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful to make this analysis between operating advantage (ROE) and growth expectations (as suggested by P/E or P/EBITDA).
  • CALM-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, CALM-US‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • CALM-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful for an analysis between historical growth (using annualized three-year revenue growth) and investor growth expectations (as suggested by P/E or Price/EBITDA) .
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • CALM-US‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

CALM-US would seem to have a hard time raising additional debt.

  • With debt at a relatively low 0.60% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 11.05%), and relatively tight interest coverage level of -60.36x, CALM-US would have a hard time raising much additional debt. Thus, the company is classified as having Limited Flexibility when it comes to raising more debt.
  • Of the 7 chosen peers for the company, only 6 of the stocks have an outstanding debt balance. Companies with no debt include .

CALM-US has maintained its Constrained profile from the recent year-end.

  • CALM-US‘s interest coverage has increased 30.21 points from last year’s low but is still below its five-year average interest coverage of 47.58.
  • Though its interest coverage increased to -60.36x from -90.57x (in 2017), its peer median remained relatively stable during this period at 20.97x.
  • Interest coverage rose 29.79 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • CALM-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 6.77% in 2013.
  • Though its debt-EV has remained relatively stable at 0.60% compared to 2017, its peer median has increased to 11.05% from 10.40% during this period.
  • Relative to peers, debt-EV fell 0.69 percentage points.

Access the detailed analysis for Cal-Maine Foods, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Industrias Bachoco SAB de CV Sponsored ADR Class B 9.96 2.93 27.11 148.63
Fresh Del Monte Produce Inc. 11.05 2.64 27.36 93.33
Sysco Corporation 24.71 1.4 7.21 25.16
Sanderson Farms, Inc. N/A 4.28 225.47 N/A
Pilgrim’s Pride Corporation 17.97 1.65 14.83 46.55
Costco Wholesale Corporation 9.95 0.98 29.67 72.45
Wal-Mart Stores, Inc. 18.73 0.81 9.23 52.01
Cal-Maine Foods, Inc. 0.6 6.67 -60.36 114.1
Peer Median 11.05 2.15 20.97 72.45
Best In Class 0.6 6.67 225.47 148.63

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Company Profile

Cal-Maine Foods, Inc. produces and markets shell eggs in United States. It engages in the production, grading, packing, marketing and distribution of fresh shell eggs, including conventional, cage-free, organic and nutritionally-enhanced eggs. The company operates farms, processing plants, hatcheries, feed mills, warehouses, offices and other properties located in Alabama, Arkansas, Florida, Georgia, Kansas, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Utah. It markets shell eggs to national and regional grocery store chains, club stores, foodservice distributors and egg product manufacturers. The company was founded by Fred R. Adams Jr. in 1957 and is headquartered in Jackson, MS.

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