Landec Corp. – Value Analysis (NASDAQ:LNDC) : May 25, 2017

Capitalcube gives Landec Corp. a score of 44.

Our analysis is based on comparing Landec Corp. with the following peers – E. I. du Pont de Nemours and Company, PolyOne Corporation, Westlake Chemical Corporation, Huntsman Corporation, Pinnacle Foods, Inc., J. M. Smucker Company, Kraft Heinz Company, General Mills, Inc., Air Products and Chemicals, Inc. and Campbell Soup Company (DD-US, POL-US, WLK-US, HUN-US, PF-US, SJM-US, KHC-US, GIS-US, APD-US and CPB-US).

Investment Outlook

Landec Corp. has a fundamental score of 44 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It trades at a lower Price/Book multiple (1.60) than its peer median (3.58).
  • The market expects LNDC-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • LNDC-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • LNDC-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • 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.
  • While LNDC-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • LNDC-US has the financial and operating capacity to borrow quickly.

Access our research and ratings on Landec Corp.

Leverage & Liquidity

LNDC-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 13.51% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 23.31%), and a well-cushioned interest coverage level of 11.14x, LNDC-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 10 peers for the company have an outstanding debt balance.

LNDC-US has maintained its Quick & Able profile from the recent year-end.

  • LNDC-US‘s interest coverage has increased 3.99 points from last year’s low and is now close to its five-year average interest coverage.
  • Though its interest coverage increased to 11.14x from 7.15x (in 2016), its peer median remained relatively stable during this period at 7.82x.
  • Interest coverage rose 3.55 points relative to peers (and is now higher than its peer median).
  • LNDC-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 15.04%.
  • The decrease in its debt-EV to 13.51% from 17.00% (in 2016) was also accompanied by a decrease in its peer median during this period to 23.31% from 24.07%.
  • Relative to peers, debt-EV fell 2.72 percentage points.

Access the detailed analysis for Landec Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
E. I. du Pont de Nemours and Company 13.92 1.94 10.46 45.81
PolyOne Corporation 33.03 1.9 5.15 23.32
Westlake Chemical Corporation 29.73 2.39 6.26 24.6
Huntsman Corporation 43.11 2.07 3.24 17.37
Pinnacle Foods, Inc. 30.76 1.62 3.36 13.83
J. M. Smucker Company 24.5 1.7 7.82 21.02
Kraft Heinz Company 23.31 0.95 5.75 13.61
General Mills, Inc. 21.42 0.72 9.38 28.55
Air Products and Chemicals, Inc. 12.76 2.03 13.99 57.88
Campbell Soup Company 15.76 0.76 11.51 38.63
Landec Corporation 13.51 1.84 11.14 60.32
Peer Median 23.31 1.84 7.82 24.6
Best In Class 12.76 2.39 13.99 60.32

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Company Profile

Landec Corp. engages in designing, developing, manufacturing, and selling of products for food and biomaterials markets and license technology applications. It operates through the following segments: Packaged Fresh Vegetables, Food Export, and Biomaterials. The Packaged Fresh Vegetables segment includes marketing and packing specialty packaged whole and fresh-cut fruit and vegetables. The Food Export segment consists of sale of whole commodity fruit and vegetable product. The Biomaterials segment sells products utilizing hyaluronan, a naturally occurring polysaccharide that is distributed in the extracellular matrix of connective tissues in both animals and humans. The company was founded by Ray Stewart on October 31, 1986 and is headquartered in Menlo Park, CA.


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