Chicken producer Gold Kist
When compared with the nation's sixth-largest chicken producer, cash-rich former Motley Fool Stock Advisor recommendation Sanderson Farms
Gold Kist's trailing 12-month operating margins of 11% look downright sickly compared with Sanderson's 17% margins. But the 5% margins at the industry's No. 2 company, Pilgrim's Pride
Children might cringe at being called chicken, but investors should be wary of broiler (chicken) prices. Up 10.6% when compared with the year-ago quarter, they are down 9.1% when compared with the previous quarter (ended June 2004) -- and Gold Kist sees this pricing trend continuing through the end of the year. Falling soybean meal costs will help offset falling broiler prices, though.
The company earned $34 million ($0.68 a share) in the latest quarter. That's a lot of quarterly income for a stock selling for $13.90 a share.
On balance, Gold Kist looks interesting. Its operating margins are strong, although not industry-leading. It has IPO cash to strengthen its balance sheet. There's the falling soybean meal costs. Add it up, consider the extremely low price-to-earnings, and you'll discover the stock is bargain-priced.
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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.