Over the past six months, J&J Snack Foods’s shares (currently trading at $90.67) have posted a disappointing 19.6% loss, well below the S&P 500’s 13.3% gain. This may have investors wondering how to approach the situation.
Is now the time to buy J&J Snack Foods, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is J&J Snack Foods Not Exciting?
Even though the stock has become cheaper, we're swiping left on J&J Snack Foods for now. Here are three reasons we avoid JJSF and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, J&J Snack Foods grew its sales at a tepid 4.7% compounded annual growth rate. This was below our standard for the consumer staples sector.
2. Fewer Distribution Channels Limit its Ceiling
With $1.58 billion in revenue over the past 12 months, J&J Snack Foods is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect J&J Snack Foods’s revenue to rise by 2.1%, a slight deceleration versus This projection doesn't excite us and suggests its products will see some demand headwinds.
Final Judgment
J&J Snack Foods isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 19.8× forward P/E (or $90.67 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
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