New Snack And Protein Bar Capacity Will Support Long Term Plant Based Demand

Catalysts

About John B. Sanfilippo & Son

John B. Sanfilippo & Son is a vertically integrated nut and snack manufacturer that supplies branded, private label, commercial ingredient and contract manufactured products across multiple retail and foodservice channels.

What are the underlying business or industry changes driving this perspective?

• New snack and protein bar production lines in the expanded Illinois footprint are scheduled to come online by year end. This positions JBSS to capture growth in better for you, high protein and energy bar segments and to drive higher margin earnings as capacity utilization scales.
• Expanded distribution into club and alternative value channels, supported by larger pack sizes and innovation under brands like Orchard Valley Harvest, is expected to benefit from consumers trading down on price but not on quality. This may support sustained revenue growth and help stabilize volumes despite higher nut costs.
• Rising demand for natural, plant based protein snacks and ingredient nuts, combined with double digit volume gains in commercial ingredients and contract manufacturing, indicates a structural shift toward B2B partnerships that can smooth category volatility and provide more resilient gross margins.
• Ongoing data driven marketing and digital advertising, informed by detailed insights into Gen Z and mainstream consumer behavior, may improve mix, reduce inefficient promotional spend and support gradual expansion of net margins as the company reallocates marketing dollars to higher return initiatives.
• Continuous operational efficiency efforts, including improved forecasting with key retailers, better supply risk management during peak seasons and optimization of commodity acquisition and price alignment, are likely to support further gross margin improvement and stronger free cash flow even in a volatile cost environment.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming John B. Sanfilippo & Son's revenue will grow by 1.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.8% today to 8.2% in 3 years time.
• Analysts expect earnings to reach $97.1 million (and earnings per share of $8.06) by about December 2028, up from $66.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 16.0x on those 2028 earnings, up from 12.6x today. This future PE is lower than the current PE for the US Food industry at 20.6x.
• Analysts expect the number of shares outstanding to grow by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent inflation in tree nut and cocoa commodities, alongside a 24.8% increase in weighted average raw material cost per pound and higher inventory values, could pressure JBSS to keep raising prices. This may further weaken category volumes and erode revenue growth and gross margins over time.
• Structural consumer shifts toward cheaper snacks and value retailers, evidenced by declining pound shipments in branded snack nuts, trail mix and recipe nuts as prices rise, may signal a long-term mix downtrend away from premium nut products. This could limit pricing power and compress net margins and earnings.
• Ongoing volume declines and lost distribution in key brands such as Orchard Valley Harvest and Fisher, combined with softness in the consumer channel, suggest that reliance on price increases to drive dollar growth may not be sustainable. This raises the risk of future revenue stagnation or decline and lower operating leverage on earnings.
• Rising debt levels and higher interest expense, coupled with larger, more expensive inventories and continued capital commitments to new bar production lines, increase financial leverage just as category growth slows. This could constrain flexibility in downturns and weigh on future net income.

Valuation

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

• The analysts have a consensus price target of $109.0 for John B. Sanfilippo & Son based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $97.1 million, and it would be trading on a PE ratio of 16.0x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $71.59, the analyst price target of $109.0 is 34.3% higher.
  
• 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.