"Food is an important part of a balanced diet." -- Fran Lebowitz
Motley Fool Hidden Gems
recommendation Fresh Del Monte
On the conference call, the producer of fresh fruit and vegetables reported that lower banana prices in North America and Europe combined with higher sea transportation costs to hurt results. Boy, that can't bode well for fellow banana importer Chiquita Brands
But for those wanting to cherry-pick the results, there were some bright spots. Grapes, extra sweet pineapples, and the "fresh cut" business were strong. The $47 million in net income for the quarter exceeded the company's $40 million in total debt. When it comes to balance sheets, Fresh Del Monte's is the sweetest in the industry.
The company also used this morning's conference call to stress that business is running smoothly and was upbeat regarding its long-term growth prospects.
Investors might be pleasantly surprised if they take the long view. Prior to today's announcement, the stock traded at just 7.9 times projected 2004 earnings. That exceedingly low valuation reflects the volatility of fruit and vegetable prices, but not the quality of the balance sheet -- and not the company's expectation of profits and growth while it makes periodic acquisitions in a highly fragmented industry.
If you're thinking that commodities like fruits and vegetables are low-margin and volatile, you're right, but look around and see what's garnering market headlines these days. US Airways
No doubt, my inbox is overflowing already with messages critical of my choice of airlines for comparison. How about low-margin retail? Wal-Mart
Yes, the universe of stocks is wide and the definition of value can be broad. But Fresh Del Monte offers one of life's necessities at far less than a market multiple, while maintaining a solid balance sheet. In a frothy market, Fresh Del Monte is a cherry waiting to be picked.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.