European And Asian Expansion Will Boost Demand While Risks Persist

Key Takeaways

• Investments in international infrastructure and diversified sourcing support revenue growth, margin improvements, and reduce supply risk through enhanced operational consistency.
  
• Expansion into proprietary farming and new produce categories strengthens vertical integration, boosts profit potential, and positions the company for long-term earnings growth.
  
• Climate vulnerability, limited international growth, industry price competition, stalled expansion plans, and potential trade barriers all pose risks to revenue, profitability, and diversification.

Catalysts

Engages in the sourcing, farming, packaging, marketing, and distribution of avocados, mangoes, and blueberries to food retailers, wholesalers, and foodservice customers in the United States and internationally.

• Rising per capita consumption of avocados and premium fresh produce in Europe and Asia, driven by expanding middle classes and a global focus on health and wellness, is accelerating Mission Produce's international sales growth; this supports higher long-term revenue.
  
• Strategic investments in in-region infrastructure (e.g., U.K. facility, Asian partnerships) and international distribution are enabling Mission Produce to capitalize on growing demand for fresh avocados abroad, widening their addressable market and building pricing power, which should positively impact both revenue and margins.
  
• The company's year-round, diversified global sourcing model (leveraging Peru, Mexico, and other regions) reduces supply risk and improves operational consistency, enhancing the ability to meet global demand spikes and thus supporting more stable gross margins and earnings growth.
  
• Investments in advanced packing, ripening, and logistics infrastructure-as well as enhancements to Mexican packhouses-are driving operational efficiency and higher capacity, enabling greater throughput and scale, which should contribute to improved net margins.
  
• Ongoing expansion of proprietary farming (especially rising blueberry and mango acreage) provides Mission Produce with higher-value, vertically integrated supply and unique category positions, boosting gross profit and long-term earnings potential as these new crops scale.

Mission Produce Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mission Produce's revenue will decrease by 9.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.7% today to 3.8% in 3 years time.
• Analysts expect earnings to reach $40.7 million (and earnings per share of $0.47) by about September 2028, up from $39.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.1x on those 2028 earnings, up from 23.7x today. This future PE is greater than the current PE for the US Food industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 1.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Mission Produce Future Earnings Per Share Growth

Risks

• Mission Produce's heavy reliance on favorable weather conditions in Peru and Mexico for avocado and blueberry production exposes the company to climate-related volatility; adverse events could sharply lower yields and drive input costs higher, negatively impacting future revenue and gross profit.
  
• Management indicated that international market expansion (Europe/Asia) is highly opportunistic but remains limited in scale and dependent on excess production out of core sourcing regions; any disruption or supply shortfall could constrain international growth potential and place a ceiling on revenue diversification.
  
• Lower average per unit selling prices (expected 20–25% decline year-over-year in Q4) combined with anticipated increases in overall supply highlight industry commoditization and price competition, which can compress gross and net margins even with higher volumes.
  
• Plans for acreage and production expansion are winding down-with no major new investment beyond existing commitments in avocados and blueberries-potentially limiting future top-line growth and increasing reliance on yield improvements rather than new revenue streams.
  
• Ongoing or future tariffs, as well as shifting global trade policies, while deemed "modest" by management for now, could materially increase costs or restrict market access if escalated, putting downward pressure on earnings and margin stability over the long term.

Valuation

• The analysts have a consensus price target of $17.5 for Mission Produce based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $40.7 million, and it would be trading on a PE ratio of 35.1x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $13.08, the analyst price target of $17.5 is 25.3% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.