Del Monte Pacific Limited (D03.SI)
Del Monte is.a brand many Singaporeans are familiar with. For me, I associate it with bananas. Others may be more familiar with it’s can fruits and tomatoes amongst many other fruit products.
The price of Del Monte stock was below $.20 for 2020. But this year, it rose from $0.16 to $0.456 today. That’s a good 187% increase over 6 months. To put it in stock sense, if I invested $10,000 in Jan, it will be worth 18,700 today. So the question is, is it still worth buying now?
Firstly, the revenue and net profit has been increasing since Q2 of 2021. So that’s a good sign. But let’s look at a few key statistics. First, the price earning ration (P/E ration). The current trailing P/E ratio (means based on last year’s revenue) is at 57.5. How does this compare to other food company. Pepsi is at a P/E of 25, and most people would agree that if a company has a P/E of more than 25, it is either a company that has a lot of growth potential, or it is overvalued.
Secondly, the profit margin is 1.58%. This means that the profit margin is really Low. While this is not unexpected in the food industry, it also means that it can be easily eaten up by competition.
Thirdly, the divided yield is about 1.15% last year. So clearly this is not a divided yielding stock.
So why might anyone by a potentially overvalued stock with Low divided and Low profit margin? 2 possible reasons I can think of are: You are convinced in the growth potential of the company or you are speculating. If you are the later, I suggest just keep your money somewhere safe and use a dollar to buy Toto.
I honestly do think Del Monte is a good company. I think it has some potential upside. I would only advise, tread carefully.
These are my humble personal opinions.