The warm weather has finally arrived, and with it, the BBQ season. It’s time to gather with friends to enjoy grilled hot dogs. Maple Leaf Foods Inc. (TSX: MFI) produces most of the sausages eaten in Canada.
This consumer protein company processes and produces value-added prepared meats, lunch kits snacks, and value-added fresh pork and poultry products sold under brands such as Maple Leaf, Maple Leaf Prime, Maple Leaf Natural Selections, Schneiders, Schneiders Country Naturals, Mina, and Devour.
Maple Leaf isn’t a stock that attracts a lot of attention, but this lack of attention isn’t justified. You should consider investing in it if you’re looking for a solid large-cap stock.
Analysts estimate that earnings will grow at a rate of 8.3% on average this year. A double-digit growth rate of 11.3% is expected in 2018.
The stock performance is very impressive. The returns have been in the green since 2012, and the five-year compound annual rate of return is 24.22%. Maple Leaf has been raising its dividend each year since 2014. In February 2017, the company raised its dividend by 22% to $0.11 quarterly.
Growth with veggie burgers
Maple Leaf has been selling food containing meat proteins since its beginning, and that’s not about to change.
However, while meat proteins constitute the bulk of its sales, Maple Leaf saw a business opportunity in the plant-based protein market. Indeed, the company acquired Lightlife Foods Inc. in March 2017, a U.S.-based manufacturer of refrigerated plant-based protein foods for US$140 million. This acquisition is in line with Maple Leaf’s strategic growth plan and its commitment to sustainability.
Plant-based protein is a fast-growing category, as consumers are increasingly looking to diversify their protein consumption. Maple Leaf is conscious that the world is changing and that it is facing profound social and environmental changes. That’s why it advocates for moderating meat consumption as part of a balanced, sustainable diet.
With the acquisition of Lightlife, Maple Leaf is getting a leading market position and brand in the U.S. in a category that is outpacing growth in the broader packaged foods sector. Maple Leaf plans to grow the business by leveraging its respective capabilities, investing in brand building, and innovating.
Lightlife has a 38% market share in the U.S. refrigerated plant protein market and reported sales of approximately US$40 million in 2016.
The company employs about 100 people at its facility in Turners Falls, Massachusetts, where it manufactures more than 30 innovative products, including plant-based tempeh, hot dogs, breakfast foods, and burgers.
Lightlife management will continue to lead the business, which will operate as a subsidiary of Maple Leaf.
On June 6, Maple Leaf announced its ambition to become the most sustainable protein company on Earth. To achieve this goal, Canada’s leading consumer meat protein company has developed the industry-first set of sustainable meat principles that will guide the company’s growth and business practices.
Maple Leaf has already made great progress in terms of sustainability. For example, it has been able to reduce GHG emissions by 33.2% since 2015.
Since it operates in a defensive sector, Maple Leaf’s stock is a pretty safe buy. People are buying meat at the grocery store each week, no matter what happens in the economy.
With its move towards selling more meatless products, Maple Leaf is well positioned to face an eventual reduction in meat consumption. This diversification will surely help to boost Maple Leaf’s share price. For these reasons, I would say it’s time to buy shares of this great but underestimated stock.
