Nuts Over Sanfilippo & Son

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Nuts! What more can you say about John B. Sanfilippo & Son (Nasdaq: JBSS)? How about the stock is down an astonishing 30% today (to a new 52-week low) after the company announced that first-quarter net income declined 64% because of high almond costs?

Its annual report, issued in August, warned that after multiple years of double-digit growth, the tree nut and peanut purveyor was facing the prospect of being constrained in capacity. Dash that concern -- the company also announced today that pounds shipped declined 1.4% in the first quarter.

John Sanfilippo's stock had skyrocketed as snacking low-carbohydrate dieters strongly increased the demand (and prices) for nuts. The stock climbed 12-fold from its January 2002 low to its January 2004 high. Not all nuts stocks benefited the way Sanfilippo has. Hawaii's largest grower of macadamia nuts, ML Macadamia Orchards (NYSE: NUT), couldn't even manage a double.

The company wisely used its newfound stock wealth to raise $38.6 million -- when the stock was selling for twice what it is today. The combination of the stock sale and strong cash flow from double-digit growth allowed it to reduce its total debt from $70.1 million in June 2003 to $19.2 million in June 2004.

So is it time to buy Kraft Foods (NYSE: KFT), General Mills (NYSE: GIS), and every other company the low-carbohydrate diet phase left gasping? Hardly, but those are stories for another day.

Sanfilippo says the almond price squeeze is now out of the way. That's good news, because the company's peak season is October through the holidays. And, if nut consumption continues at higher than historical growth rates, as the CEO expects, then the stock's 6.5 multiple against fiscal 2006 earnings is just nutty (or low).

Some low-carbohydrate-producing companies have gone through the complete boom-to-bust cycle, like egg producer Cal-Maine Foods (Nasdaq: CALM). While Sanfilippo is not an Anheuser-Busch (NYSE: BUD), it does have a vastly improved balance sheet and the prospects of a strong peak season, making its stock look interesting.

For more Foolish analysis to chew on, see:

• 5 Better Food Bets
• Atkins Does It Again
• Saving Krispy's Kreme

Fool contributor W.D. Crotty does not own stock in Sanfilippo, but does love nuts. In fact, W.D. might be nuts.