How Dole plc (NYSE: DOLE) compares to growth, competition and a possible risk factor
This article was originally published on Simply Wall Street News
Dole plc (NYSE: DOLE), recently entered the market as a newly formed entity, the result of the combination of Dole Food Company and Total Produce. As analysts begin to cover the stock, we can expect more traction from institutions and retail going forward. Since this is the start of their activity as a publicly traded entity, we will review their activities and fundamentals.
Dole plc will be reorganized into the following segments: Fresh Fruits, Fresh Vegetables, Diversified Fresh Products. The company operates primarily in the North American and European fresh fruit and vegetable markets. The 2 markets have a combined size of US $ 335 billion and are expected to grow at an annualized rate of 2.7% from 2020 to 2025.
The company plans to capitalize on the interest in organic foods given the increased focus on health and nutrition, and benchmark higher growth in categories such as berries, avocados, organics. and value-added salads, with annualized growth rates of 7.9%, 7.1%, 10.6% and 8.4%, respectively, from 2018 to 2020.
Dole Plc has global competitors, but the combined new company’s US $ 9 billion in revenue ranks them number one against the competition.
The most notable companies that rival Dole are:
When analyzing a company like Dole, it is always a good idea to compare it to the performance of competitors, so that we have a better idea of how the market may react to the stock and what level of performance is expected.
The graph below shows the expected level of revenue once the company has filed the first joint annual report. Remember, Dole went public as a combined entity of Dole Food Company and Total Produce. The expected revenue is US $ 9.5 billion for the full year 2022.
The company’s profits have historically hovered above 1%, and the past twelve months have generated a profit margin of 1.3%.
Unfortunately, with the exception of the past 12 months, Free Cash Flow has been lower than Statutory Profits – this may be a point of caution as Free Cash Flow does not match earnings.
However, the joint entity is only just beginning and the drivers of shareholder value will include:
Simplification of operations
Successful merger integration
Early expression of cost synergies – management succeeds in reducing the costs of business expenses
Economies of scale – the size of the entity should give them pricing power and brand recognition
Investors looking to grow their portfolio may want consider the prospects of a company before buying its shares.
Key points to remember
Dole has recently entered the market, and with that comes a host of risks and opportunities. For investors, this could be a great opportunity to watch a stock in the not-so-popular agriculture industry.
The main value of the stock comes from the possibility of it being mispriced, rather than a strong growth opportunity.
One of the possible reasons why investors are not yet jumping on the stock is the historical lag of free cash flow and earnings.
For investors who have found the stock disappointing, there are a few alternatives that look appealing in this industry.
So, if you want to dig deeper into this title, it is crucial to take into account the risks it faces. Concrete example: we have spotted 1 warning sign for Dole you must be aware.
If you are no longer interested in Dole, you can use our free platform to view our list of more 50 other stocks with strong growth potential.
Simply Wall St analyst Goran Damchevski and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.