Shares of Brazilian pork and poultry producer BRF S.A. (NYSE:BRFS) are up 8.5% in 1:30 p.m. EST trading, apparently in response to a "material fact" about which the company informed investors this morning.
Writing in a 6-F filing with the Securities and Exchange Commission (SEC), BRF disclosed that in the course of holding its "BRF Day 2020 – Vision 2030" today, it intends to provide "certain estimates and expectations ... for the next ten years." Specifically, BRF is making the following projections:
- From 2021 to 2023, it expects to record approximately 65 million Brazilian reais worth of revenue, and to double its earnings before interest, taxes, depreciation, and amortization (EBITDA) as compared to the last 12 months.
- From 2024 to 2026, both revenue and EBITDA will grow to a level "2.5 times ... current levels."
- From 2027 to 2030, revenues will rise to R$100 million, and EBITDA will reach 3.5 times current levels, with EBITDA margins of 15% or better and net profit margins of "approximately 6%."
- Over the entire period from 2020 to 2030, BRF will invest R$55 billion in order to make all the above happen.
To put these projections in dollar terms, BRF recorded revenues of $7.3 billion earnings before interest, taxes, depreciation, and amortization (EBITDA) of $645 million, and net income of $228 over the past 12 months, according to data from S&P Global Market Intelligence. So for example, in the nearest term discussed, the above projections appear to have BRF promising to produce $1.3 billion in annual EBITDA just three years from now and therefore (all else being equal), perhaps more than $450 million in profit.
Valuation-wise, that would imply that BRF stock that trades for $4.50 or so today is selling for just 7.5 times fiscal 2023 earnings. For a company planning to grow its earnings 2.5 or 3.5 times in 10 years (roughly a 25% or 35% yearly growth rate), that sounds like quite the bargain -- and investors today are treating it like one.