When Motley Fool co-founder Tom Gardner laments his "biggest mistake" in recent memory, he talks about Sanderson Farms (NASDAQ:SAFM), one of his former Motley Fool Stock Advisor recommendations.

After a 70% one-year gain, Tom said, "Sell." Sounds like good advice, doesn't it? But since then, it has nearly tripled. Who thought a chicken processor would soar like an eagle on sales boosted by low-carbohydrate diets?

Well, the boom you heard this morning was the flying chicken returning from the stratosphere. With the stock down 20%, you would expect really bad news, but that's not the case.

Sales for the most recent quarter were up 27% year-over-year, and net income soared 120%, but the company lowered earlier earnings guidance for the fiscal year. Higher grain prices and lower prices for boneless breast meat sent this barnyard sensation to a projected 2004 price-to-earnings multiple of 6.9 to 7.7 times earnings. Now that's cheap.

Hot chicken prices were expected to cool. The one analyst who follows the company was projecting earnings to fall to $5.23 in 2005 -- an estimate that leaves it trading at a chicken feed P/E of seven times earnings. And speaking of scratch (the green kind in your wallet), the company has total debt of $15.5 million and $84.2 million in cash.

Sanderson Farms is the Rodney Dangerfield of the protein (meat) producers. Tyson Foods (NYSE:TSN) and Pilgrim's Pride (NYSE:PPC) have P/Es in the mid-teens and a pile of debt -- as does pork producer Smithfield Foods (NYSE:SFD). Even more diversified food companies such as Hormel Foods (NYSE:HRL) and ConAgra (NYSE:CAG) are not awash in cash -- and they sell for mid-teen P/Es, too.

Sanderson Farms could even be considered for Motley Fool Hidden Gems. It has a market capitalization of $730 million (small), one analyst following it (undiscovered on Wall Street), insider ownership of 58% (the company's results affect them directly), and strong free cash flow (the real measure of a winner).

Maybe it is time for Tom Gardner to take his burlap bag down to the farm and bag this bargain chicken for his readers.

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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

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