Estimates have been rising for Calavo Growers, Inc. ( CVGW - Snapshot Report ) after the company delivered better than expected results for its fiscal fourth quarter. And management stated that it expects 2012 to be a record year for the company.

It is a Zacks #1 Rank (Strong Buy) stock.

On top of strong growth, the company pays a dividend that yields a solid 2.0%.

The Avocado Kings

Calavo Growers, Inc. engages in the procurement and marketing of avocados and other perishable foods and the preparation and distribution of processed avocado products. The company delivers its food products to food distributors, produce wholesalers, supermarkets, and restaurants around the globe.

The company is headquartered in Santa Paula, California and has a market cap of $409 million.

Fourth Quarter Results

Calavo Growers delivered better than expected results for the fourth quarter of its fiscal 2011 on January 5. Earnings per share came in at 25 cents, beating the Zacks Consensus Estimate by 4 cents. This was down from 32 cents in the same quarter last year, however, due to a significantly higher cost of sales.

Net sales rose 37% year-over-year to $147.3 million, driven in part by an acquisition. In the company's Fresh segment, revenue increased 9% period, due to significantly higher fresh avocado prices, as well as continued strong demand from U.S. consumers.

Gross profit declined from 13.3% to 9.1% of net sales. But this was somewhat offset by a decline in selling, general and administrative expenses, from 6.6% to 4.8% of net sales.

Outlook

Management gave a bullish outlook for 2012 following the solid fourth quarter. CEO Lee Cole stated "We expect to benefit across the board from an expanding supply of fresh avocados, sharply improving gross margin in our fresh refrigerated guacamole products, a fast-growing RFG subsidiary and increasing unit volumes in diversified produce. As a result, I am extremely confident that in fiscal 2012 Calavo will surpass its existing full-year record for earnings per share of $1.22."

This prompted analysts to revise their estimates higher, sending the stock to a Zacks #1 Rank (Strong Buy).

The Zacks Consensus Estimate for 2012 is now $1.49, well ahead of the record $1.22, and representing 99% growth over 2011 EPS. The 2013 consensus estimate is currently $1.73, corresponding with 16% EPS growth.

Dividend

In addition to strong earnings growth, this small cap pays a dividend that yields a solid 2.0%. Since it began paying an annual dividend in 2002, the company has raised it 6 times at a compound annual rate of 12%.

Valuation

The valuation picture looks reasonable for CVGW. Shares trade at 17.3x 12-month forward earnings, a slight premium to its historical median of 16.3x.

It sports a PEG ratio of 1.15 based on a consensus long-term growth rate of 15.0%

The Bottom Line

With strong growth projections, rising earnings estimates, a 2.0% dividend yield and reasonable valuation, Calavo Growers offers a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.