While Sales Have Soured, Profit Gains Persist for Saputo in 2Q; Shares Inflated
After digesting second-quarter results, which included 1.9% reported sales growth and a 90-basis point uptick in operating margins to 10.2%, we don’t anticipate a material change to our CAD 28 fair value for no-moat Saputo. However, the current price (which implies a valuation of around 23 times forward earnings) strikes us as quite lofty for a dairy processor that has failed to amass a competitive edge. More specifically, the market price suggests Saputo will boast more than 6% top line growth ...Saputo produces, markets, and distributes an array of dairy products including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. Co.'s products are sold in several countries under brand names such as Saputo, Alexis de Portneuf, Armstrong, COON, Cracker Barrel*, Dairyland, DairyStar, Friendship Dairies, Frigo Cheese Heads, La Paulina, Milk2Go/Lait's Go, Neilson, Nutrilait, Scotsburn*, Stella, Sungold, Treasure Cave and Woolwich Dairy. Co. operates its business through three sectors, the Canada Sector, the USA Sector and the International Sector.
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