Cal-Maine Foods (CALM): Valuation Check After New Prepared Foods CFO Appointment

Cal-Maine Foods (CALM) just brought in Johnathan Zoeller as Chief Financial Officer for its Prepared Foods segment, and that quietly raises an interesting question: how much potential upside may still remain in this stock?

See our latest analysis for Cal-Maine Foods.

The timing is interesting, because while the latest 1 day share price return of 3.07 percent and 7 day share price return of 2.67 percent suggest a short term bounce, the 90 day share price return of minus 25.14 percent and year to date share price return of minus 19.33 percent show momentum has been fading. This comes even as long term total shareholder return over three and five years remains strong.

If Zoeller joining has you thinking about where the next leg of growth might come from, it could be worth exploring fast growing stocks with high insider ownership as a way to spot other compelling ideas.

With earnings under pressure, a double digit slide this year, but a sizeable gap to analyst targets and intrinsic value estimates, is Cal-Maine a mispriced egg producer, or is the market already discounting any future growth?

Price-to-Earnings of 3.3x: Is it justified?

On a simple snapshot, Cal-Maine Foods looks inexpensive, with its last close of $85.21 equating to a strikingly low price-to-earnings ratio of 3.3 times.

The price-to-earnings multiple compares what investors pay for each dollar of current earnings. This is especially relevant for a mature, profitable food producer like Cal-Maine. A low P E can point to the market doubting how durable current earnings are, or it can highlight a disconnect between short term pessimism and long term earning power.

In Cal-Maine's case, the stock not only trades at a deep discount to peers, with the US Food industry on roughly 20 times earnings, but also sits close to its own estimated fair P E of 3.4 times. That suggests the market may already be pricing earnings close to a level our fair ratio work points toward, even as the company has reported exceptional profitability and a 46.9 percent return on equity.

That gap to the broader industry stands out, with Cal-Maine's 3.3 times multiple just a fraction of both its peer average of 19.3 times and the wider US Food sector at 20.4 times. This signals that investors are paying far less for each dollar of CALM earnings than they are for competitors.

Explore the SWS fair ratio for Cal-Maine Foods

Result: Price-to-Earnings of 3.3x (UNDERVALUED)

However, persistent earnings volatility and ongoing revenue contraction could quickly erode today’s apparent discount if egg pricing normalizes faster than expected.

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

Another View, a much higher fair value

Our DCF model suggests a very different picture, putting Cal-Maine Foods' fair value near $277.36 per share, far above the current $85.21 price. If cash flows remain stronger for longer than analysts expect, the market may be underestimating how cyclical these earnings really are.

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 911 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 this perspective does not fully align with your own view, or you prefer to dive into the numbers yourself, you can build a complete narrative in just a few minutes: Do it your way.

A great starting point for your Cal-Maine Foods research is our analysis highlighting 3 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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