Assessing Cal-Maine Foods (CALM) Valuation After Insider Buying and Strong Quarterly Growth

Cal-Maine Foods (CALM) just saw its Chief Strategy Officer, Keira Lombardo, ramp up her stake with a 2,800-share purchase. The timing follows strong quarterly results that showed meaningful gains in both sales and earnings.

See our latest analysis for Cal-Maine Foods.

Cal-Maine Foods’ management optimism comes as the stock faces some near-term pressure, with a 7.7% share price drop over the past month and a year-to-date decline of 15.4%. Still, long-term momentum is clear: the total shareholder return is up 7.7% over the last year and has increased nearly 186% over five years. Recent leadership moves and strong results suggest investors see both challenges and growth potential ahead.

If the latest insider buying has you curious about what else is moving, now is the perfect moment to broaden your search and discover fast growing stocks with high insider ownership

The real question for investors now is whether this pullback offers an attractive entry point into a proven winner, or if Cal-Maine’s recent strength means shares already reflect the company’s future prospects.

Price-to-Earnings of 3.4x: Is It Justified?

At a last close of $89.35, Cal-Maine Foods trades at a remarkably low price-to-earnings ratio of 3.4x, signaling an undervaluation compared to its peers and the broader food industry.

The price-to-earnings ratio (P/E) represents how much investors are willing to pay per dollar of annual earnings, providing a quick gauge of market sentiment and pricing relative to company profits. In defensive sectors like food production, a lower P/E often suggests skepticism about future earnings sustainability or market uncertainty.

Cal-Maine’s P/E stands well below the U.S. food industry average of 17.8x and the peer group average of 38.5x. This highlights an extreme valuation gap. While the market may have doubts about future profits following a period of rapid earnings growth, these comparisons suggest plenty of pessimism is already priced in. For additional perspective, our fair value framework estimates a fair P/E ratio of 2.7x for Cal-Maine, indicating that even relative to conservative regression-based benchmarks, the stock holds intriguing value potential.

Explore the SWS fair ratio for Cal-Maine Foods

Result: Price-to-Earnings of 3.4x (UNDERVALUED)

However, uncertainty around declining annual revenue and a sharp drop in net income growth could pose headwinds to Cal-Maine Foods’ undervaluation narrative.

Find out about the key risks to this Cal-Maine Foods narrative.

Another View: Discounted Cash Flow Paints a Different Picture

Switching gears to our DCF model, the long-term cash flow forecast values Cal-Maine Foods at $278.73 per share. This is far above the current price of $89.35. This suggests the stock could be deeply undervalued if those future cash flows pan out as projected. But how reliable are these kinds of estimates, especially when industry cycles and earnings can be volatile?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cal-Maine Foods for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Cal-Maine Foods Narrative

If you think the story looks different through your own lens, you can dig into the numbers and shape your own case in under three minutes. Do it your way

A great starting point for your Cal-Maine Foods research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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