Food Processing Stocks

B&G Foods Inc Valuation – July 2018 $BGS

Company Profile (excerpt from Reuters): B&G Foods, Inc. (B&G Foods), incorporated on November 25, 1996, is a holding company. The Company manufactures, sells and distributes a portfolio of shelf-stable and frozen foods across the United States, Canada and Puerto Rico. Its products include frozen and canned vegetables, hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, wine vinegar, maple syrup, molasses, salad dressings, pizza crusts, Mexican-style sauces, dry soups, taco shells and kits, salsas, pickles, peppers, tomato-based products, puffed corn and rice snacks, nut clusters and other specialty products. Its products are marketed under various brands, including Ac’cent, B&G, B&M, Baker’s Joy, Bear Creek Country Kitchens, Brer Rabbit, Canoleo, Cary’s, Cream of Rice, Cream of Wheat, Devonsheer, Don Pepino, Durkee, Emeril’s, Grandma’s, Green Giant, JJ Flats, Joan of Arc, Las Palmas, Le Sueur, MacDonald’s, Mama Mary’s, Maple Grove Farms of Vermont, Molly McButter, Mrs. Dash, New York Flatbreads, New York Style, Old London, Original Tings, Ortega, Pirate’s Booty, Polaner, Regina, Sa-son, Sclafani, Smart Puffs, Spice Islands, Spring Tree, Static Guard, Sugar Twin, Tone’s, Trappey’s, TrueNorth, Underwood, Vermont Maid, Victoria, Weber and Wright’s. It also sells and distributes Static Guard, a household product brand. It sells and distributes its products directly and through a network of brokers and distributors to supermarket chains, foodservice outlets, mass merchants, warehouse clubs, non-food outlets and specialty distributors.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BGS – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,041,463,347 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.78 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 223.72% Pass
6. Moderate PEmg Ratio PEmg < 20 14.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.29 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.71 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.09
MG Growth Estimate 15.00%
MG Value $80.29
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $30.24
MG Value based on 0% Growth $17.73
Market Implied Growth Rate 2.92%
Current Price $29.90
% of Intrinsic Value 37.24%

B&G Foods, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.94 in 2014 to an estimated $2.09 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.92% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into B&G Foods, Inc. revealed the company was trading above its Graham Number of $24.23. The company pays a dividend of $1.86 per share, for a yield of 6.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.34, which was below the industry average of 25.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.95.

B&G Foods, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$26.95
Graham Number $24.23
PEmg 14.34
Current Ratio 3.78
PB Ratio 2.29
Current Dividend $1.86
Dividend Yield 6.22%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $767,830,000
Total Current Liabilities $203,227,000
Long-Term Debt $2,096,897,000
Total Assets $3,438,763,000
Intangible Assets $2,394,279,000
Total Liabilities $2,566,115,000
Shares Outstanding (Diluted Average) 66,715,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.97
Dec2017 $3.26
Dec2016 $1.73
Dec2015 $1.22
Dec2014 $0.76
Dec2013 $0.98
Dec2012 $1.20
Dec2011 $1.04
Dec2010 $0.67
Dec2009 $0.44
Dec2008 $0.27
Dec2007 $0.54
Dec2006 $0.42
Dec2005 $0.29
Dec2004 $1.19
Dec2003 $0.00
Dec2002 $0.30
Dec2001 -$0.38
Dec2000 -$0.92

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.09
Dec2017 $1.96
Dec2016 $1.26
Dec2015 $1.03
Dec2014 $0.94
Dec2013 $0.97
Dec2012 $0.89
Dec2011 $0.69
Dec2010 $0.49
Dec2009 $0.40
Dec2008 $0.44
Dec2007 $0.51
Dec2006 $0.48
Dec2005 $0.43
Dec2004 $0.34
Dec2003 -$0.12
Dec2002 -$0.19

Recommended Reading:

Other ModernGraham posts about the company

B&G Foods Inc Valuation – August 2016 $BGS
B&G Foods Inc Valuation – March 2016 $BGS
B&G Foods Inc. Analysis – September 2015 Update $BGS
The 8 Best Stocks For Value Investors This Week – 6/27/15
B&G Foods Analysis – June 2015 Update $BGS

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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