CAL-MAINE FOODS INC (NASDAQ:CALM): A Prime Value Stock with Strong Fundamentals

In value investing, finding companies trading below their intrinsic value while having good basic financials is a core strategy. This method, started by Benjamin Graham and developed by investors like Warren Buffett, looks for chances where the market has briefly mispriced a stock, giving a safety buffer for long-term investors. One way to find these stocks is to look for those with high valuation scores—meaning they are priced low compared to others—while also having good profitability, sound finances, and acceptable growth. CAL-MAINE FOODS INC (NASDAQ:CALM) appears as a strong example from this type of search, deserving more attention for those focused on value chances.

Valuation Metrics

CALM’s valuation metrics are very appealing, getting an 8 out of 10 in ChartMill’s fundamental review. This shows a stock priced much lower than both industry norms and wider market indexes, which is an important beginning for value investors looking for inexpensive assets.

• Price-to-Earnings (P/E) Ratio: At 4.45, CALM’s P/E is much below the industry average of 18.73 and the S&P 500’s 27.43, making it less expensive than 96.59% of similar companies.
• Forward P/E Ratio: 6.86, compared to an industry average of 17.97 and S&P 500 average of 22.87, further highlighting its low price.
• Enterprise Value to EBITDA and Price/Free Cash Flow: Both ratios show CALM is valued lower than over 94% of companies in its sector.

These numbers imply the market might be missing CALM’s possibility, matching the value investing idea of buying assets for less than their value. For investors, this low price offers a buffer—a margin of safety—against possible declines or errors in calculating intrinsic value.

Financial Health

Financial health is vital in value investing, as it lowers the chance of lasting loss and shows strength. CALM does very well here, receiving a top score of 10/10 for health, showing a solid balance sheet and good solvency.

• Debt-Free Operations: CALM has no debt, leading to a Debt/Equity ratio of 0, which is unusual and not common in the industry.
• Liquidity Ratios: A Current Ratio of 6.38 and Quick Ratio of 5.42 are some of the best in the sector, showing strong ability to cover short-term needs.
• Altman-Z Score: 11.00, much higher than the safe level, indicating no bankruptcy danger and doing better than 93.18% of peers.

This financial steadiness means CALM can handle economic ups and downs without the pressure of interest costs or refinancing dangers, a quality value investors look for when finding lasting inexpensive companies.

Profitability

Profitability is another key part of value investing, as it confirms a company’s capacity to create returns and maintain operations. CALM gets a high 9/10 here, with margins and returns that are top in its industry.

• Return Metrics: Return on Assets (39.55%), Return on Equity (47.65%), and Return on Invested Capital (42.26%) all are in the highest groups of the food products industry.
• Margins: Profit Margin (28.63%), Operating Margin (36.05%), and Gross Margin (43.43%) have gotten better lately and do better than almost all peers.
• Consistent Performance: Positive earnings and operating cash flow over the last five years show steady profitability.

High profitability next to a low price often points to a possible value chance, as it hints the market is not completely valuing the company’s earnings ability—a gap value investors try to use.

Growth Considerations

While growth is less important than price and safety in value investing, it gives insight for future possibility. CALM’s growth score of 5/10 is average, with good past performance but careful future estimates.

• Past Growth: Revenue increased 83.20% over the last year and 25.82% each year on average, while EPS jumped 393.08% last year and 132.15% on average—outstanding numbers.
• Future Projections: Earnings and revenue are predicted to fall by -31.80% and -6.14%, respectively, which might clarify the low price.

For value investors, this difference between past wins and future doubt is common; the main point is if the low cost sufficiently covers the risks. CALM’s good basic finances suggest it has the health and profitability to handle a slowdown, possibly making current prices a good point to enter.

Conclusion

CAL-MAINE FOODS INC offers an interesting case for value investors, mixing low price with excellent financial health and profitability. While growth outlooks are modest, the company’s lack of debt, high margins, and past performance give a margin of safety that fits value investing ideas. Investors should do more research, but CALM’s profile—shown in its full fundamental report—makes it a notable candidate in the hunt for inexpensive stocks.

For more ideas like CALM, see our Decent Value Stocks screen, which finds companies with good prices and sound basic finances.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should perform their own research and consult with a financial advisor before making investment decisions.