Pilgrim's Pride (PPC) Just Gave Investors Something To Think About
Pilgrim's Pride (PPC) has kicked off a private offering of up to €500 million in senior notes, a funding move tied to its planned acquisition of Walkers Deli & Sausage Company and other general corporate needs.
Pilgrim's Pride shares closed at US$29.99, with the 1 day share price return slipping 1.61% and the 7 day share price return down 3.54%. The 30 day share price return is up 9.25% and the 3 year total shareholder return is 42.86%, which points to longer term momentum despite a weaker year to date and the recent pullback as the debt financed expansion plans are digested by the market.
Scan how Pilgrim's Pride compares with other protein producers pursuing growth via acquisitions by reviewing our hand-picked list of solid balance sheet and fundamentals (24 results)
Pilgrim's Pride appears to be a solid global protein business that is still willing to take on fresh debt for growth. The key question is whether that ambition is already reflected in the current share price.
Most Popular Narrative: 10.3% Undervalued
On the most followed view of Pilgrim's Pride, a fair value of $33.44 sits above the latest $29.99 close, which places this new €500 million notes issue within a bigger earnings and margin story.
The company and the broader industry are benefiting from robust growth in global chicken demand, both due to expanding middle classes in emerging markets and the growing affordability gap between chicken and other proteins like beef and pork. If investors are overestimating the durability or pace of this demand, for instance by overlooking potential substitution pressure from alternative proteins or cyclical demand slowdowns, it could result in unrealistically high revenue growth expectations.
Want to see what revenue path and margin profile sit behind that fair value label for Pilgrim's Pride? The narrative leans on steadier top line expansion and fatter profitability, then pairs it with a lower future earnings multiple than many consumer staples enjoy today. Curious how those ingredients combine into a single number.
Result: Fair Value of $33.44 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
Still, Pilgrim's Pride faces pressure from volatile feed and input costs, as well as rising labor and regulatory expenses that could challenge the higher margin narrative.
Find out about the key risks to this Pilgrim's Pride narrative.
Another View: Pilgrim's Pride Looks Rich On Cash Flows
There is a catch. While the analyst narrative tags Pilgrim's Pride as about 10% undervalued at $33.44, our DCF model paints a different picture and points to a value of $20.31, which implies the stock is trading above its estimated future cash flows. Which lens do you trust more when cash and profits disagree?
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 Pilgrim's Pride 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
Reading this mix of caution and optimism around Pilgrim's Pride, it makes sense to pressure test the numbers yourself and move quickly to form your own view using the 3 key rewards and 3 important warning signs
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- Reduce portfolio stress by focusing on companies with stronger balance sheets and cleaner fundamentals in the list of solid balance sheet and fundamentals (24 results)
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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