Sometimes, beating analysts' estimates by $0.05 isn't what captures the market's attention during an earnings conference call. That was certainly the case for Smithfield Foods (NYSE:SFD), the world's largest pork processor and hog producer.

Beefing up growth potential with China
In last week's call, management settled rumors that had been floating around that the company was talking to Chinese trading company COFCO. Smithfield's team speculated that China's hog market could be slashed by a whopping 20% due to disease. Given the country's problems, China could become an enormous market for Smithfield to tap.

After the conference call, Smithfield announced an official agreement with an "undisclosed" trading company to deliver 60 million pounds of Paylean-free pork to China through year-end. Sixty million pounds sure sounds like a lot of meat, but compared to the meat processor's typical yearly production, the number is fairly modest. However, management did indicate that more agreements could develop a long-term relationship with the unknown company.

That's a lot of hog ... or not?
So just how important is the 60-million-pound contract to Smithfield? Well, in 2006, the company sold 3.1 billion pounds of fresh pork products. The contract represents just 1.9% of that. Sixty million pounds isn't so big after all. And considering that Smithfield sold another 2.9 billion pounds of processed pork during the year, the Chinese deal's impact on profits doesn't look substantial ... yet.

The deal might be modest now, but it indicates that Smithfield has a foot in the doorway of the hugely important Chinese market. The stock price is still where it was before the news -- could the company's new access to China provide a bargain opportunity for investors? 

Is Smithfield's price tag meatier than its rivals?
Comparing Smithfield and its competitors, it's selling at a much lower valuation. If the company will be able to expand into China in a big way, the growth could be selling for a discount at the current price.  

Company

 Forward P/E

P/B         

PEG         

 Smithfield Foods

12.75

1.65

1.46

 Tyson Foods (NYSE:TSN)

16.08

1.63

3.1

 Hormel (NYSE:HRL)

15.39

2.56

1.81

 Sadia S.A. (NYSE:SDA)

N/A

2.51

N/A

 Perdigao S.A. (NYSE:PDA)

N/A

2.76

N/A
Data from Yahoo! Finance

There is the possibility China may not become a significant importer from the protein king, and you wouldn't -- and shouldn't -- base your valuation solely on a chance that the country will drive significant growth for Smithfield. However, this Fool believes China's bursting population is not to be ignored. Its industrialization has farmers dropping their pitchforks and abandoning their livestock for big city manufacturing jobs. And while the country has a large agriculture market, a lack of farmers cannot keep up with the demand of a rapidly growing population. As a result, China has begun importing many of these goods.

Is this stock tasty enough for investors?
Smithfield still has a debt burden to eat up, and it needs to work on expanding its margins, as its profit margin is well below the already-lean industry average. But the company is headed in the right direction and slowly improving operations. Wall Street looks pretty upbeat for the company; nine out of 14 analysts recommend investors beef up their portfolios with the company. And the Motley Fool CAPS community seems to agree, offering the company a four- out of five-star rating.

The company is selling at a discount, and its future growth story is selling for a great value. Whether the share price will reach a higher level or not is of course unknown, but improvement seems promising in the future and if the company can effectively tap the newly opened Chinese market, I think I'd be filling up my plate with this stock.

Other meaty Foolishness:

Sadia is a recomendation of Motley Fool Hidden Gems. A 30-day free trial gives you full access to see what everyone is clucking about.

Fool contributor Markos Kaminis has no ownership interest in any of the companies discussed here, but you might find a tasty pork souvlaki recipe at his financial markets blog, Wall Street Greek. The Fool has a mustard-hot disclosure policy.