As of October 6, 2023, J&J Snack Foods Corp (JJSF, Financial) experienced a daily loss of 4.43%, with a 3-month gain of 1.74%. The stock's Earnings Per Share (EPS) (EPS) stands at 3.41. But does this mean that the stock is modestly undervalued? This article aims to answer this question by providing a comprehensive valuation analysis of J&J Snack Foods. Let's delve into the company's financials and intrinsic value.
A Snapshot of J&J Snack Foods
J&J Snack Foods Corp manufactures, markets, and distributes snack foods and beverages to foodservice and retail supermarket outlets. Its products, such as frozen beverages, juice, fruit bars, sorbet, cakes, and cookies, reach a wide range of consumers, including restaurants, supermarkets, convenience stores, universities, theaters, and theme parks. The company operates in three business segments: food service, retail supermarkets, and frozen beverages. With a current stock price of $153.27, we aim to compare it to its intrinsic value, estimated at $170.66, to determine whether it's fairly priced.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it's overvalued, and its future return is likely to be poor. Conversely, if it's significantly below the GF Value Line, its future return will likely be higher.
The stock of J&J Snack Foods (JJSF, Financial) is estimated to be modestly undervalued, according to our GF Value calculation. At its current price of $153.27 per share and a market cap of $3 billion, J&J Snack Foods stock is estimated to be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
A Look into J&J Snack Foods' Financial Strength
Investing in companies with poor financial strength can pose a higher risk of permanent capital loss. Therefore, it's crucial to thoroughly review a company's financial strength before deciding to buy its stock. A great starting point for understanding the financial strength of a company is by looking at its cash-to-debt ratio and interest coverage. J&J Snack Foods has a cash-to-debt ratio of 0.38, which is worse than 54.5% of 1789 companies in the Consumer Packaged Goods industry. Despite this, GuruFocus ranks J&J Snack Foods' overall financial strength at 8 out of 10, indicating strong financial health.
Profitability and Growth of J&J Snack Foods
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. J&J Snack Foods has been profitable for 10 years. Over the past twelve months, the company had a revenue of $1.5 billion and Earnings Per Share (EPS) of $3.41. Its operating margin is 5.97%, which ranks better than 57.07% of 1831 companies in the Consumer Packaged Goods industry. Overall, GuruFocus ranks J&J Snack Foods' profitability at 7 out of 10, indicating fair profitability.
Growth is a critical factor in a company's valuation. Fast-growing companies create more value for shareholders, especially if the growth is profitable. However, the 3-year average annual revenue growth of J&J Snack Foods is 4.7%, which ranks worse than 56.52% of 1711 companies in the Consumer Packaged Goods industry. The 3-year average EBITDA growth rate is -11.6%, ranking worse than 78.38% of 1517 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, J&J Snack Foods's ROIC was 6.5, while its WACC came in at 7.25.
Conclusion
In conclusion, the stock of J&J Snack Foods (JJSF, Financial) is estimated to be modestly undervalued. The company's financial condition is strong, and its profitability is fair. However, its growth ranks worse than 78.38% of 1517 companies in the Consumer Packaged Goods industry. To learn more about J&J Snack Foods stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
