Last Update 06 Dec 25

Fair value Increased 1.20%

SAP: Outperform Ratings And Buybacks Will Shape Future Risk Reward Balance

Analysts have nudged our Saputo price target higher to C$38.32 from C$37.86, as modestly stronger long term revenue growth and margin expectations, reflected in recent target increases across the Street, support a slightly richer fair value multiple.

Analyst Commentary

Bullish analysts have recently revised their models to reflect a healthier balance of volume growth and pricing power, citing improving visibility on Saputo's margin recovery and cash flow generation. The cluster of upward price target moves signals growing confidence that management can deliver on its multi year productivity and cost saving initiatives.

These revisions also indicate that the market may be underestimating Saputo's ability to reprice contracts and optimize its product mix in favor of higher margin categories, particularly as input cost volatility moderates. As a result, bullish analysts now see greater upside to earnings per share and free cash flow than previously embedded in their targets.

While the dispersion in published price targets has widened, the general tilt of recent commentary has moved toward a more constructive stance on the shares. Incremental evidence of operational execution and capital discipline is being viewed as a catalyst that could help narrow the valuation discount to global dairy peers over the next 12 to 18 months.

Bullish Takeaways

Bullish analysts highlight the sequence of price target increases as evidence that consensus now assumes a more durable margin recovery and improved earnings visibility.
Recent upward revisions embed stronger expectations for operating leverage, as cost efficiencies and plant optimization benefits begin to flow through the income statement.
The higher targets reflect growing conviction that Saputo can close part of its valuation gap to global peers as execution on strategic initiatives proves repeatable.
Bullish analysts see a more attractive risk reward profile, with potential upside to current estimates if demand remains resilient and input cost pressures continue to ease.

Bearish Takeaways

Bearish analysts caution that, despite higher targets, the investment case still relies heavily on flawless execution of cost and restructuring plans, leaving limited room for operational missteps.
Some remain concerned that competitive intensity and contract repricing cycles could slow the pace of margin expansion assumed in more optimistic models.
There is lingering skepticism around the sustainability of volume growth in a slower macro environment, which could restrain multiple expansion.
Bearish analysts note that even with recent upgrades, the stock may still trade at a discount for an extended period if management fails to consistently deliver quarterly results in line with elevated expectations.

What's in the News

Board of Directors authorizes a new share buyback plan on November 14, 2025, reinforcing Saputo's commitment to returning capital to shareholders (Key Developments).
Saputo launches a normal course issuer bid to repurchase up to 20,498,278 shares, or 5% of its issued share capital, as part of a broader capital allocation strategy balancing capex, dividends, debt reduction, and buybacks, with authority expiring no later than November 18, 2026 (Key Developments).
On November 6, 2025, the Board signals confidence in long term prospects by considering a separate share repurchase program for up to 2% of outstanding common shares over 12 months following TSX acceptance (Key Developments).
Between July 1 and September 30, 2025, Saputo repurchases 2,980,700 shares for CAD 91.39 million, completing 14,929,747 shares, or 3.56% of its float, under the buyback announced November 15, 2024 (Key Developments).
Saputo is added to the FTSE All World Index (USD), potentially broadening its global investor base and supporting liquidity (Key Developments).

Valuation Changes

Fair Value: The intrinsic value estimate has risen slightly to CA$38.32 from CA$37.86, reflecting modestly stronger long term assumptions.
Discount Rate: The discount rate is effectively unchanged at 6.12%, indicating no material shift in perceived risk profile or cost of capital.
Revenue Growth: Long term revenue growth expectations have increased marginally to approximately 3.15% from 3.15%, signaling a slightly more optimistic outlook for top line expansion.
Net Profit Margin: Forecast net profit margin has risen moderately to about 4.35% from 4.28%, incorporating incremental improvement in operational efficiency and mix.
Future P/E: The future price to earnings multiple has edged down slightly to 18.83x from 18.90x, suggesting a modest tempering of valuation multiples despite improved fundamentals.

Focus on premium and branded dairy products, supply chain agility, and tailored market offerings supports sustained revenue and market share growth globally.
Efficiency drives through automation, cost control, and optimized operations are expanding margins and improving net earnings, with further upside expected.
Heavy reliance on traditional dairy and insufficient adaptation to plant-based trends risks long-term competitiveness, margin pressure, and exposure to supply, regulatory, and trade uncertainties.

Catalysts

About Saputo

Produces, markets, and distributes dairy products in Canada, the United States, Australia, Argentina, and the United Kingdom.What are the underlying business or industry changes driving this perspective?

Saputo's strategic focus on higher-value, branded, and convenience-oriented dairy products is supported by robust demand from a growing global population, accelerating urbanization, and shifting consumer habits-these factors are enabling volume and pricing growth across channels, directly benefiting revenue and supporting long-term market share gains.
Accelerating operational efficiency initiatives-including recent large-scale capital investments in automation, network optimization, and SG&A reduction-are driving substantial run-rate cost savings, margin expansion, and improved net earnings, with further upside as the final tranche of targeted efficiencies is achieved in the U.S. by fiscal year-end.
Expansion into premium and specialty segments, such as value-added cheeses and beverage enhancers, targets consumers in emerging middle-class markets and developed economies alike, allowing margin lift through favorable mix and premiumization, which supports sustainable improvement in average selling prices and overall net margin.
Enhanced global presence and supply chain agility, paired with deepening commercial partnerships and tailored offerings in export and domestic markets, positions Saputo to capitalize on the global shift toward Western-style diets and rising dairy demand in underserved international markets, providing multi-year revenue growth avenues.
The new, more favorable U.S. Federal Milk Marketing Order pricing formula and continued robust commercial execution are expected to improve input cost structures and unlock incremental EBITDA, directly supporting net margin and earnings growth as market dynamics stabilize.

Saputo Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Saputo's revenue will grow by 2.7% annually over the next 3 years.
Analysts assume that profit margins will increase from -0.8% today to 4.1% in 3 years time.
Analysts expect earnings to reach CA$853.8 million (and earnings per share of CA$2.16) by about September 2028, up from CA$-153.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as CA$945 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.1x on those 2028 earnings, up from -91.7x today. This future PE is greater than the current PE for the CA Food industry at 12.5x.
Analysts expect the number of shares outstanding to decline by 2.87% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 5.97%, as per the Simply Wall St company report.

Saputo Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Rising consumer shift toward plant-based and alternative proteins is expected to accelerate and was not directly addressed in Saputo's growth narrative; this could reduce demand for core dairy offerings, potentially impacting Saputo's long-term revenue growth and market share.
Heightened environmental and regulatory pressures, particularly regarding sustainability and agricultural emissions, could drive up compliance costs and capex requirements (as alluded to in discussions about inflation and input management), risking net margin compression over the long term.
Milk supply volatility in key regions such as Australia (droughts, flooding) and Argentina ("chaos" and macro volatility), as highlighted in management's remarks, poses a persistent risk to input costs and production reliability, impacting operational efficiency, earnings stability, and potentially revenue.
Despite notable cost optimization initiatives underway, Saputo's strategy remains heavily reliant on traditional dairy, with limited evidence of diversification into high-growth segments like plant-based alternatives; this could result in long-term earnings pressure versus more agile competitors as secular trends weaken core dairy demand.
Ongoing industry consolidation among large retailers and geopolitical risks (e.g., tariffs, trade flows) could increase pricing pressure and create export barriers; management's need for "agile supply chain" and vigilance on "trade and policy developments" underscores a risk to international revenues and gross margin resilience over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$34.364 for Saputo based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$38.0, and the most bearish reporting a price target of just CA$26.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$20.7 billion, earnings will come to CA$853.8 million, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 6.0%.
Given the current share price of CA$34.05, the analyst price target of CA$34.36 is 0.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Lift Saputo Price Target as Margins Improve and Growth Outlook Brightens