Is Mission Produce (AVO) Undervalued Following Its Latest Earnings?

Mission Produce earnings spark a fresh look at the stock

Mission Produce (AVO) just posted third quarter revenue of US$450 million and a net loss of US$6.5 million, prompting investors to reassess how the avocado specialist is balancing volume growth and profitability.

The fresh earnings release and production outlook have arrived after a patchy run for Mission Produce’s stock, with a 90 day share price return of 14.5% but a 1 year total shareholder return that is slightly negative. Recent gains hint that investors are warming to the story again as avocado volumes build, even though today’s US$12.87 share price still reflects mixed sentiment toward profitability and longer term execution.

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Mission Produce now trades at US$12.87 after a sharp 90 day rebound, but with a slightly negative 1 year return and fresh losses on the income statement, does the current valuation still skew in favour of buyers?

Price-to-Earnings of 49.9x: Is it justified?

Mission Produce trades at $12.87 with a trailing P/E of 49.9x, which puts a rich price on its current earnings profile compared with both peers and the wider food sector.

P/E tells you how many dollars investors are currently paying for each dollar of profit. For a business like Mission Produce that operates in fresh produce, a higher ratio often reflects optimism around future profit growth or more resilient earnings than the sector. When that multiple stretches, it signals that a lot of future improvement is already built into the share price.

Here, the 49.9x P/E is expensive versus the US Food industry average of 18.1x and a peer average of 15.3x. That gap suggests the market is pricing Mission Produce as a higher growth or higher quality story than the typical food stock, even though its recent profit margins have slipped from 2.6% to 1.8% and past earnings include large one off items. At the same time, Simply Wall St’s fair P/E estimate of 79.6x implies the current multiple is below a level the market could move toward if the growth forecasts play out.

Explore the SWS fair ratio for Mission Produce with the Explore the SWS fair ratio for Mission Produce.

Result: Price-to-Earnings of 49.9x (OVERVALUED)

Still, the narrative around Mission Produce can quickly change if earnings remain thin relative to a 49.9x P/E or if volume growth disappoints compared with recent optimism.

Find out about the key risks to this Mission Produce narrative.

Another view on Mission Produce’s value

The high 49.9x P/E paints Mission Produce as expensive, yet the SWS DCF model points the other way. At $12.87, the stock trades about 15.8% below an estimated fair value of $15.28, which frames the recent earnings wobble as a possible entry point instead of a red flag. Which signal do you trust more: the headline multiple or the cash flow math?

For a deeper look at how that cash flow estimate is built and what would need to change for the valuation to shift, 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 Mission Produce 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 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals on Mission Produce so far. If you want to move quickly and base your view on more than just headlines, start by weighing the 3 key rewards and 3 important warning signs.

Looking for more Mission Produce investment ideas?

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• Target potential mispricing by scanning a curated set of proven businesses that still look overlooked through the 49 high quality undervalued stocks.
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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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