Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Amira Nature Foods Ltd Dropped, but Shouldn't Have

By Jeremy Bowman - Feb 25, 2014 at 3:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Amira Nature Foods Ltd (NYSE: ANFI) were looking unhealthy today, falling as much as 22% after reporting third-quarter earnings this morning. 

So what: The specialty-rice maker came up short on the bottom line, posting per-share earnings of $0.22, up from $0.17 a year ago but below estimates of $0.28. Meanwhile, revenue breezed past expectations, climbing 25.1% to $142.5 million, well ahead of the consensus at $126.5 million. Management cited higher raw material costs for the disappointing profit growth as cost of material rose from 73.5% to 75.4%, or an additional expense of about $2.7 million. Had cost of material remained the same, Amira would have reported an EPS of $0.30. 

Now what: Given the above calculation, investors seem to be burying the lede, here. Amira stock had been bid up substantially in the past few months on little news, which may explain today's sell-off, but the market seems (small-f) foolish to overlook the strong revenue growth, focusing on food costs instead, which are highly volatile and out of Amira's control. The company also raised its revenue for the full year to $507 million-$517 million, slightly ahead of estimates at $508 million, but below fourth-quarter estimates. Still, I'd expect the stock to bounce back as the company continues to expand its product line and geographic footprint. 

Jeremy Bowman owns shares of Amira Nature Foods. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.