Have you been paying attention to shares of Sanderson Farms ? Shares have been on the move with the stock up 2.9% over the past month. The stock hit a new 52-week high of $200 in the previous session. Sanderson Farms has gained 44.9% since the start of the year compared to the 2.6% move for the Zacks Consumer Staples sector and the 8.9% return for the Zacks Food - Meat Products industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 26, 2021, Sanderson Farms reported EPS of $7.38 versus consensus estimate of $6.73 while it beat the consensus revenue estimate by 3.77%.
For the current fiscal year, Sanderson Farms is expected to post earnings of $17.02 per share on $4.54 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $17.02 per share on $4.52 billion in revenues. This represents a year-over-year change of 10.66% and -0.37%, respectively.
Sanderson Farms may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Sanderson Farms has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 11.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 27X versus its peer group's average of 10.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Sanderson Farms currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Sanderson Farms fits the bill. Thus, it seems as though Sanderson Farms shares could have potential in the weeks and months to come.
How Does Sanderson Farms Stack Up to the Competition?
Shares of Sanderson Farms have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Industrias Bachoco, S.A. de C.V. (
IBA Quick Quote IBA - Free Report) , Tyson Foods ( TSN Quick Quote TSN - Free Report) , and United Natural Foods ( UNFI Quick Quote UNFI - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 11% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Sanderson Farms, even beyond its own solid fundamental situation.