Saputo Inc. (TSX:SAP), the largest dairy processor in Canada and one of the 10 largest in the world, announced better-than-expected third-quarter earnings results during trading hours on February 4, and its stock ended the day with a gain of more than 3%. Let’s take a closer look at the results and the fundamentals of its stock to determine if this could be the start of a sustained rally higher and if we should be buyers today.

The results that easily beat expectations

Here’s a summary of Saputo’s third-quarter earnings results compared with what analysts had expected and its results in the same period a year ago.

Metric Q3 2016 Actual Q3 2016 Expected Q3 2015 Actual
Adjusted Diluted Earnings Per Share $0.44 $0.39 $0.38
Revenues $2.90 billion $2.87 billion $2.82 billion

Source: Financial Times

Saputo’s adjusted diluted earnings per share increased 15.8% and its revenues increased 2.8% compared with the third quarter of fiscal 2015. The company’s very strong earnings-per-share growth can be attributed to its adjusted net income increasing 13.5% to $175.4 million, helped by its total operating costs increasing just 1.5% to $2.58 billion.

Its slight increase in revenue can be attributed to higher sales volumes, the inclusion of revenues from its acquisitions of Woolwich in October 2015 and the everyday cheese business of Lion-Dairy & Drinks Pty Ltd. in May 2015, and a $261 million gain on foreign currency translation. However, this growth was partially offset by lower international selling prices of its cheese and dairy ingredients and the disposal of its Bakery division in the fourth quarter of fiscal 2015.

Here’s a quick breakdown of 10 other notable statistics from the report compared with the year-ago period:

  1. Revenues increased 12.9% to $1.57 billion in its U.S.A segment
  2. Revenues decreased 1.3% to $992.8 million in its Canada segment
  3. Revenues decreased 21% to $333.4 million in its International segment
  4. Average block market per pound of cheese decreased 21% to US$1.621
  5. Average butter market price per pound increased 26.5% to US$2.562
  6. Average whey market price per pound decreased 61% to US$0.226
  7. U.S. average exchange rate to the Canadian dollar increased 17.5% to $1.333
  8. Adjusted earnings before interest, taxes, depreciation, and amortization increased 15% to $320.4 million
  9. Earnings before income taxes increased 15.6% to $250.54
  10. Cash generated from operating activities increased 15.4% to $296.31 million

Saputo also announced that it will be maintaining its quarterly dividend of $0.135 per share, and the next payment will come on March 11 to shareholders of record at the close of business on March 1.

Could Saputo’s stock continue higher from here?

It was a great quarter overall for Saputo, and the fact that it surpassed analysts’ expectations was icing on the cake, so I think its stock has responded correctly by rising. I also think this could be the start of a sustained rally higher and that the stock represents a great long-term buy today for two reasons in particular.

First, Saputo’s stock still trades at just 23.3 times fiscal 2016’s estimated earnings per share of $1.51 and only 20.5 times fiscal 2017’s estimated earnings per share of $1.72, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 37 and the industry average multiple of 33.7.

With the multiples above and its estimated 10% long-term earnings growth rate in mind, I think the company’s stock could consistently command a fair multiple of at least 25, which would place its shares around $43 by the conclusion of fiscal 2017, representing upside of over 22% from today’s levels.

Second, Saputo pays an annual dividend of $0.54 per share, which gives its stock a yield of about 1.5%. A 1.5% yield may not seem like a legitimate reason for buying the stock at first glance, but it is of the utmost importance to note that the company has raised its annual dividend payment in each of its last 15 fiscal years, and its 3.8% increase in August 2015 has it on pace for 2016 to mark the 16th consecutive year with an increase.

With all of the information provided above in mind, I think all Foolish investors should take a closer look at Saputo and strongly consider initiating positions in it today.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.