How is Flowers Foods Inc (NYSE:FLO) going to perform in the future? What should potential investors be aware of? In this article we will look at the latest data and analyse the future performance of this growth stock in more detail. Check out our latest analysis for Flowers Foods
Exciting times ahead for FLO
Analysts covering FLO are expecting a 37.1% increase in earnings in the three year’s time. That means that we can be expecting the EPS to grow to $1.17 levels.
This means earnings will be higher than recent years.
Revenue during the same period is expected to grow from $3.93 Billion to $4.22 Billion in 2020 and net income is predicted to rise from $163 Million to $250 Million in 2020, roughly growing 1.5x. Margins are expected to be not high but still acceptable at 5.9% during this time as well.
Basis for the growth
Flowers Foods has underperformed the Food and Beverage industry over the past year.
Whilst FLO’s Return on Equity of 13.4% isn’t horrific, it means that the company has underperformed the Food and Beverage industry average of 35.79%. This is expected to slightly improve with analysts expecting ROE in 3 years to be 16.2%.
Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.
Final words
Flowers Foods is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is FLO overpriced? Or could it be considered an undervalued opportunity? I recommend you see our latest FREE analysis to find out!
If you are not interested in FLO anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.