Forget about tech stocks! Time to buy more and more Sanderson Chicken farms?
After three quarter losses, Sanderson Chicken farms reported profit! Do you think we should buy more?
http://ub-news.com/news/ocls-pphm-safm-free-exel-gm-us-popular-stocks/2572 .html
Sanderson Farms Inc. (SAFM) rose 8.02 percent to $45.41 and jumped earlier to $47.19, the highest intraday price since June 12. The fourth-biggest U.S. chicken producer reported fiscal second-quarter profit more than double the average analyst estimate after three quarters of losses.
I think those who bought around $20 few months back should keep as long-term investment.
New investors should buy vigorously in every market weakness. Do you agree?
Answers
2183 points
ChaosNantuko answered 6 months ago …
I'm not convinced. In the past, this company was growing profits by growing revenues. That means the growth is sustainable.
In this last quarter, it grew because they cut costs, NOT because revenues grew. Revenues actually shrunk slightly comparing this quarter and the same quarter a year ago. If we assume the costs will stay the same as they did this quarter, and that revenues will stay roughly the same as well, then they'll make 1.27 EPS per quarter. That's 5.08 annually. Without growing revenues, i wouldn't expect the earnings to continue growing, and so I'd give it a PE ratio of 10-15.
PE of 10 puts it at 50.80.
PE of 15 puts it at 76.20.
Its undervalued yes, but the margin of safety isn't significant, and this last quarter was a good demonstration of how their costs are the biggest determinant of their profit. I think long term investors should focus more on companies that can survive potentially rising costs (large profit margins), and are growing revenues, rather then companies with high costs, and stagnant revenues.
