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Why Dole Stock Became a Meme Stock and Jumped 6%

By Rich Smith – Sep 30, 2021 at 2:01PM

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Reddit goes bananas for Dole.

What happened

Remember that you heard it here first: The Dole (DOLE 2.06%) fruit company is now a meme stock.

As Marketwatch reported this morning (OK, so I guess you actually heard it here second), "Reddit's 'Apes' have gone bananas and made Dole ... a meme stock." Turns out this morning, momentum traders on Reddit decided that a fungicide-resistant fungus is going to devastate South American banana crops this year, boosting prices on the fruit and fattening Dole's bottom line as a consequence.  

And Dole stock is up 6.3% as of 12:30 p.m. EDT because of this report.

A rising stock arrow superimposed over bunches of bananas.

Image source: Getty Images.

So what

As theories go, it's not a bad one -- not perfect, either. Even if the rumors are true, a shortage of bananas could just as easily hurt Dole's business as help it. But here's the thing:

The rumor doesn't necessarily have to be true for investors to be right about Dole stock. Why not? Because the valuation on Dole speaks for itself.

Now what

Consider: Dole stock looks a bit pricey at 21 times earnings right now and with a market capitalization of $1.4 billion. Dig just a little deeper, however, and you'll discover that this fruit vendor is actually something of a cash cow.

According to the latest data from S&P Global Market Intelligence, Dole generated nearly $148 million in positive free cash flow over the last year -- more than twice its reported $60 million net profit. This gives Dole stock a sweet price-to-free cash flow ratio of less than 10. Plus, analysts forecast nearly a 10% annualized earnings growth rate for the company over the next five years.

Conclusion: Whether or not there's a fungus, and whether or not Dole's a growth stock, Dole is definitely a bona fide value stock today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dole plc Stock Quote
Dole plc
DOLE
$10.41 (2.06%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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