Can Chiquita Move Higher Yet?

In the ever-difficult, commoditized business of produce, Chiquita Brands International (NYSE: CQB  ) has been a constant player, if troubled in recent years. Margin pressure and a shift in industry trends left the company with weak financials and angry shareholders, but in the past 12 months much of that has turned around. In the midst of a restructuring and armed with a (relatively) new CEO, this company is pushing its 52-week highs but may be headed higher. Does the banana brand belong in your portfolio?

Redux 
In May of last year, Chiquita took a 40% haircut in stock price when net income fell from $48 million in the year-ago quarter to just $6 million. A frustrating drop, and poorly timed given that I had recommended the stock shortly before. But my original thesis has since played out, and the stock is up more than 100% since its May lows.

The reason is a mix between industry dynamics and company-specific ones, but heavily favoring the latter. One of the big macro factors hurting Chiquita for years was fuel costs and pricing pressure, but both have since subsided since their most dire periods around 2010. Chiquita itself, though, has taken substantial efforts to turn around the business. The company divested its weak assets, such as a smoothie joint venture that just wasn't working, and reinvested in its core business -- 'nanners and other produce. The restructuring plan has resulted in what management believes is $60 million per year in cost savings. Chiquita ditched avocados and grapes and doubled down on bananas -- the space where it is the No. 1 brand in Europe.

Perhaps most important for future growth, the company rightfully put an emphasis on private-label goods. Many grocery stores have turned to private labels as a means to boost profitability while simultaneously offering consumers lower prices. Chiquita expects that it will ship 2 million cases of private-label produce per year.

Given that the stock has more than doubled from its 52-week low, though, is there still a place for investment?

Comps 
We have only begun to see the improvements at Chiquita. Though it's been a quick and impressive effort since 2010, I believe the real momentum lies ahead in the private-label business, and perhaps further international expansion.

On a valuation basis, Chiquita isn't richly valued, though not the extreme bargain it once was, either. Set to return to profitability this year, Chiquita is trading at a little over 10 times forward earnings. Competitor Dole (UNKNOWN: DOLE.DL  ) , which just this week received a buyout offer led by its CEO, is now valued at 20 times forward earnings. On an EV/EBITDA basis, Dole has been valued by its CEO's offer at nearly 19 times. Chiquita trades at 12.6 times.

As an investor, it's wise to look at a business as if you were a private owner. With this week's Dole buyout, we have the opportunity to see exactly what a private owner would pay for the business, and use that to compare it to Chiquita.

Given the ongoing restructuring and smart management decisions, coupled with reasonable valuation, Chiquita remains an intriguing play for investors interested in the space.