Parmalat SpA : A good buy now? Relative to peers, maybe.

Parmalat SpA relative valuation is now UNDERVALUED. It was previously rated OVERVALUED, and has a fundamental analysis score of 75.

Our analysis is based on comparing Parmalat SpA with the following peers – Bongrain SA, Danone SA, Centrale del Latte di Torino & C. S.p.A. and Sachsenmilch AG (BH-FR, DNN-IT, CLT-IT and SAHA-DE).

Relative Valuation

Parmalat SpA’s price of EUR 2.51 is lower than CapitalCube’s implied price of EUR 2.68. CapitalCube believes that at these levels, Parmalat SpA is undervalued and has upside potential. Over the last 52 week period, the stock has fluctuated between EUR 2.34 and EUR 2.56.

Relative Valuation

Company Overview

  • Relative outperformance over the last year has faded more recently.
  • Parmalat S.p.A. currently trades at a higher Price/Book ratio (1.42) than its peer median (0.67).
  • We classify PLT-IT as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • PLT-IT has a successful operating model with relatively high net profit margins and asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • PLT-IT‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While PLT-IT‘s revenue growth in recent years has been above the peer median, the stock’s PE ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s capital investment seems appropriate for a business with peer median returns.
  • PLT-IT has the financial and operating capacity to borrow quickly.

Investment Outlook

Parmalat SpA has a fundamental score of 75 and has a relative valuation of UNDERVALUED.

Parmalat SpA is on the top left quadrant of the CapitalCube Value – Price Matrix. We classify this space a ‘Value Play’. Here, Parmalat SpA is potentially undervalued, since it trades below its CapitalCube Implied Price of 2.68. At the same time, Parmalat SpA is also fundamentally strong with a score of 75. This is a classic value stock definition.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

PLT-IT has a Harvesting profile relative to its peers.

We classify PLT-IT as Harvesting because of the market’s low expectations of growth (PE of 22.62 compared to peer median of 29.33) despite its relatively high returns (ROE of 6.41% compared to the peer median ROE of 3.23%).

The company currently trades at a higher Price/Book ratio of 1.42 compared to its peer median of 0.67.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

PLT-IT has moved to an Harvesting from a relatively high ROE profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Parmalat SpA engages in the manufacture and distribution of food products. The company operates through the following business segments: Milk, Dairy Products, and Fruit Beverages. The Milk segment includes ultra high temperature, pasteurized, condensed, powdered, and flavored milk; and also cream and bechamel. The Dairy Products segment comprises yogurt, fermented milk, desserts, cheese and butter. The Fruit Beverages segment consists of fruit juices, nectars and tea. The company was founded in 1961 and is headquartered in Collecchio, Italy.

Disclaimer

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