CAL-MAINE FOODS INC (NASDAQ:CALM) – A Potentially Undervalued Stock with Strong Fundamentals

CAL-MAINE FOODS INC (NASDAQ:CALM) stands out as a compelling pick for value investors, according to our fundamental screening criteria. The company combines an attractive valuation with strong profitability, financial health, and a solid dividend yield, making it a noteworthy candidate for further analysis.

Key Strengths

Valuation (Rating: 8/10)
CALM appears undervalued relative to its industry and broader market. Key highlights include:

• A Price/Earnings (P/E) ratio of 5.28, significantly below the industry average of 35.98 and the S&P 500 average of 27.48.
• 95.6% of industry peers trade at higher P/E multiples.
• A Price/Free Cash Flow ratio that suggests CALM is priced more cheaply than 93.4% of competitors.

Profitability (Rating: 9/10)
The company demonstrates strong earnings power:

• Return on Equity (ROE) of 41.6% and Return on Assets (ROA) of 32.15%, both among the best in the industry.
• Profit margin of 26.08%, outperforming 97.8% of peers.
• Consistent operating cash flow over the past five years.

Financial Health (Rating: 9/10)
CALM maintains a robust balance sheet:

• No outstanding debt, resulting in a Debt/Equity ratio of 0.
• Current ratio of 3.86 and Quick ratio of 3.26, indicating strong liquidity.
• Altman-Z score of 8.62, well above the threshold for financial distress.

Dividend (Rating: 7/10)
Investors benefit from an attractive income stream:

• Dividend yield of 13.88%, far exceeding the industry average of 4.72%.
• A sustainable payout ratio of 21.16%, leaving room for future growth.

Growth (Rating: 5/10)
While past performance has been strong, future expectations are mixed:

• EPS grew 303.79% YoY, with a 5-year average growth rate of 34.26%.
• Revenue expanded 60.01% over the past year, averaging 11.32% annually.
• Analysts project declining earnings (-14.6%) and revenue (-0.8%) in the near term.

Why CALM Fits a Value Strategy

Despite near-term earnings headwinds, CALM’s low valuation, high profitability, and strong financial position suggest it may be undervalued. The company’s ability to generate cash and reward shareholders with a high dividend adds to its appeal.

For a deeper dive, review the full fundamental report on CALM.

Our Decent Value Stocks screener highlights more stocks with strong valuations and fundamentals.

Disclaimer

This is not investment advice. The observations here are based on current data, but investors should conduct their own research before making decisions.